Markets Mostly Risk-On Friday — Tech Falters

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Investors were mostly buying economically-sensitive assets Friday, while tech stocks were serving as a drag on the S&P 500. 

The S&P 500 was up a few tenths of a percentage point before falling the same amount and was held back by the tech-heavy Nasdaq down as much as 0.6%. The 10-Year Treasury yield was flat at 0.6%, after having fallen to 0.59%. Yields fall when prices rise. 

Tech stocks, which investors like for their secular growth drivers than can power through headwinds, were falling, while cyclical sectors were rising. And the move into treasuries, which was strong this week, moderated. .

The NYSE FANG Index was flat, while the iShares PHLX Semiconductor etf  (SOXX) - Get Report was down 0.4%. Microsoft  (MSFT) - Get Report, which has had an impressive run of late, fell 0.8%. 

Large cap oil, consumer discretionary, industrials and banking were up between a tenth of a percentage point and more than 2%. Banks report earnings next week and are in a bear market, with the KBW Bank etf  (KBWB) - Get Report down 30% from its June 8 level, which was an almost 3-month high. 

One positive for those sectors which are tied to reopenings and broader economic momentum was that Gilead Sciences  (GILD) - Get Report said its phase three COVID vaccine testing was yelling very positive results. The stock rose 2%. 

This week, unlike Friday, was somewhat risk-off, as virus cases rose, a force competing against the fiscal stimulus investors hope Congress will allow for once more. That could provide a bridge from more quarantine periods to another reopening period. 

Investors moved money into almost all asset classes this week, with the most defensive assets seeing the largest inflows. Roughly $30 billion flowed into cash, according to Bank of America. Investors had built up an impressive cash pile in the first quarter to then buy stocks, sending stocks up in the second quarter. Flows into cash had stabilized for some time, but with choppy trading action this week, capital moved back into safety. 

Equities saw a $6.2 billion inflow, while bonds saw a $17 billion inflow. The 10-Year Treasury yield fell 7 basis points. The S&P 500 gained some, as tech powered the index. 

"Even if the Trump administration wouldn’t allow another complete lockdown in the economy, the increasingly cautious behaviour from the population could seriously dent the speed of the post-Covid economic recovery,” wrote Ozkardeskaya, Senior Analyst at Swissquote Bank. 

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