By midday, stocks were falling hard Thursday, but the losses were especially heavy in the tech sector.
All three major U.S. indexes were down, with the S&P 500 down about 0.7% and the tech-heavy Nasdaq down as much as 1.4%. The 10-Year Treasury yield fell to as low as 0.6%. Yields fall when prices rise, meaning the price move in treasuries was a risk-off signal, while the equity market was signaling more of a risk-on tone. Cyclical value stocks have been sold-off hard in the past month-and-a-half.
In the morning, most sectors were down considerably, led by tech, but with participation in the losses from value stocks and cyclicals as well.
Democratic Presidential nominee and former vice president Joe Biden rose to 51% favorability among voters, according to a Wall Street Journal and NBC poll. That’s up 11 percentage points from the last reading. Biden poses the threat of higher corporate taxes, which may go all the way to his preferred 28% if he wins in November and the Democrats also take the majority of the Senate.
The current corporate tax rate is 21%. The stock market has risen even with Trump’s election chances falling since March, although that is because of the apparent economic recovery. Biden is a somewhat business-unfriendly president. Biden may also pose stringent regulations on healthcare, and the NYSE Healthcare Index fell more than 0.8%.
The NYSE FANG Index, the components of which had soared from June 8 through the beginning of July, fell as much as 2%. Investors had rushed more into growth tech stocks to avoid economic turbulence posed by the virus and capture secular growth trends. But several big tech companies are reporting earnings this week and their stocks are trading at stretched valuations and investors are de-risking. Netflix (NFLX) - Get Netflix, Inc. (NFLX) Report reports earnings after the bell and fell as much as 2%.
Cyclical sectors like banks, materials, industrials and oil were around flat to up less than 1%, as they have been beaten up since June 8 and earnings are rolling in. Large cap consumer discretionary fell a few tenths of a percentage point even as retail sales for June grew more than 7% year-over-year, beating estimates of more than 5%. This points to a strong recovery, which is currently met by paused reopenings, higher virus cases and questions over more fiscal stimulus to households and businesses.