Tech stocks lead the market, while cyclicals remained largely flat in Tuesday’s mixed trading action.
The S&P 500 was largely flat, as the components of the tech-heavy Nasdaq, up 0.5%, supported the S&P. Even as risk sentiment was far from strong, the 10-Year Treasury yield, which was far lower than the recent inflation rate, rose to 0.71%. Yields rise when prices fall.
The Federal Reserve’s updated and highly inflationary policy has caused yields to move a touch higher even on days when economically sensitive stocks performed poorly.
“Although we do believe the Fed’s shift back towards Keynesian economics will eventually return inflation to its 2% target path this process will take time while the a return to sustainable growth is a precondition which also supports higher long-term rates in the interim,” wrote Steven Ricchiuto, Chief U.S. Economist for Mizuho Securities in a note. "Our year end call for the 10-year note suggests a further increase towards 1% followed by a further 50 basis point increase by the middle of next year.”
In that period, most expect stocks to rise as the economy would strengthen.
But lifting stocks Tuesday were Apple (AAPL) - Get Apple Inc. (AAPL) Report, semiconductors and other tech names. Apple rose as much as 2% to $131 a share after Bloomberg reported that the company has asked suppliers to produce components for 75 million 5G iPhones for 2020, which adds to the company’s expected unit sales for the year. More importantly, this is another indicator of strong hardware demand even through the pandemic. Apple shares have risen sharply of late, but the news is still a boost to investor interest in the stock.
Cyclical stocks like oil, consumer discretionary and banking were mostly down, with some up a tick. Risk sentiment has recently been poor as recently weak economic data is coupled with a lack of new fiscal stimulus to keep the pace of the economic recovery fast.