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Investors Are Dumping Stocks Even as Positive Economic Data Emerges

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Stocks were selling off Thursday, a move that seems attributable to several factors. 

The S&P 500 fell 1.65%, a down-move aided by the sell-off of the tech components of the Nasdaq, which fell 2.75%. The 10-Year Treasury yield fell to 0.66%. Yields fall when prices rise. 

Wednesday, the Federal Reserve said it would keep interest rates near 0% until at least 2023 and that it does not see inflation hitting 2% until that time. This means monetary policy will be incredibly accommodative to the economy and market for the foreseeable future. But with the low rate environment almost completely priced into stocks and the economic outlook calling for more of the same slow growth seen pre-pandemic, investors clearly had no interest in buying stocks Thursday. This comes even after a rally in cyclical stocks and a move out of safe government bonds to end the day Wednesday. 

"The sell-off in the equity market experienced following the chairman’s post-meeting press conference should not have been a surprise to anyone following the Fed and markets,” wrote Mizuho Chief U.S. Economist Steven Ricchiuto in emailed remarks to reporters. "Since the Covid-19 lockdown was imposed back in March, the Chairman has repeatedly warned of the uncertainty surrounding the outlook for the economy, and discussed not only the risks to the recovery but also the need for more fiscal stimulus. Each time he has spoken, the market sold off and then recovered fully and pushed higher in the following days and weeks, We believe this time it is no different.” 

Sure, tech was leading the way down. Apple  (AAPL) , Amazon  (AMZN)  and others fell more than 2% and a re-rating of growth tech valuations seems to now be in full swing, as secular growth trends accelerated by the at-home environment potentially pull forward massive amounts of demand into the near-term. But it was value stocks, many of which are highly correlated to economic activity, that was also doing some of the legwork. 

Bank stocks fell more than 1%, as did oil and consumer discretionary. This comes even as jobless claims for the past week beat estimates, coming in at 860,000, against estimates of 870,000. Still, the rate of decrease in claims has been slow and while the economic data has overall confirmed a speedy economic recovery, some signs of weakness in the speed of the recovery have emerged, making investors nervous. 

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