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Midday Update: Stocks Erase Gains

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Stocks were mixed by midday Thursday. Investors were buying the dip in tech before gains in the broader sector moderated. 

The S&P 500 fell 0.6%, with the tech-heavy Nasdaq down 0.3%. The 10-Year Treasury yield moved up to 0.71%, as inflation data beat expectations. Yields rise when prices fall. 

The Nasdaq is up almost just above 2% since Tuesday morning as investors have been buying the dip after a 10% correction in growth tech stocks. The gain on the index was 1% in the morning, before investors began shedding tech. Oracle  (ORCL)  shares rose more than 1% ahead of its earnings report. 

Many believe there's a broader re-rating of valuations in growth tech stocks like cloud, streaming and e-commerce stocks that could be underway. The at-home environment from the pandemic may have pulled forward massive amounts of demand for these services, leaving investors to question the level of earnings that one can reasonably expect in out-years of the valuation. 

The Vanguard S&P 500 Value ETF  (VOOV) , which encapsulates large cap cyclical and defensive stocks, fell 0.5%. Some cyclicals like consumer discretionary and banks were up a tick, while some were down. Defensive sectors like consumer staples and utilities down, pointing to a slightly risk-on posture in the equity market. 

Negatively, jobless claims for the past week missed expectations. Claims were 884,000 against estimates of 840,000, although this does show a trend in the last few weeks of claims being well under 1 million, a level they sat at for months. This indicates the economy is on its path towards recovery, although investors would ideally like to see that path accelerate. 

Positively, the producer price index for August showed inflation of 0.3% against estimates of 0.2%, although that was below July’s result of 0.6%. The beat may have been a part of the inflation-related move in markets, with yields up (including for the 30-Year Treasury bond). Still, oil prices were down a tick. 

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