US Shares drop back As T-Yields Rise Ahead of Long Weekend

Major US equity indices showed mixed performance on Thursday, with tech stocks underperforming as US yields soured. Investors received another update on the recovery in the jobs market. The number of people seeking unemployment benefits ticked up last week, according to the Labour Department, but remained at a historically low level. The data reflect a robust US labour market with near record-high job openings and few layoffs.

The S&P 500 was last down about 0.9% and testing the 4,400 level as investors digested the latest bank earnings ahead of the long weekend.

US shares have been primarily impacted by downside in large-cap tech stocks as US yields surged. The heavily tech-weighted Nasdaq 100 was thus the underperformer of the major US indices, trading down about 1.9% and dropping back below the 14,000 level and eyeing a test of weekly lows just above 13,900.

Amid a strong performance in energy, consumer staple, material and industrial stocks (aided by strength in commodity prices and the market’s defensive mood), the Dow was last trading flat. US economic data in the form of a mixed March Retail Sales report and a stronger than expected Michigan Consumer Sentiment survey didn’t seem to have much of an impact on the Fed tightening language, nor subsequently on equity market sentiment.

FOMC member John Williams threw his support behind the idea of 50-bps rate hikes at coming meetings. All four of the major US banks that reported on Thursday, including Goldman Sachs, Citigroup, Morgan Stanley and Well Fargo, beat analyst earnings forecasts.

Just as JP Morgan earnings had shown a day earlier, all showed a steep drop in the YoY rate of earnings growth in Q1 2022 compared to Q4 2021 and, the S&P 500 Financials sector was down 0.6%, despite the steep rise in US bond yields on the day. Equity investors are braced for a barrage of further earnings releases in the coming week. US markets are closed on Friday for Easter festivities.