Tech Powered Stock Rebound Halted Amid Elevated Treasury Yields

Barry Adams
22 Aug, 2023
New York City

Stocks struggled and lacked direction and U.S. Treasury yields traded near elevated levels last seen 16 years ago. 

Market averages lacked yesterday's momentum after investors worried about rising bond yields and its impact on the broader economy and the banking sector. 

Higher yields are likely to increase undeclared losses in Treasury securities portfolio held by banks, and the rising rates will only force banks to raise more capital and direct a larger share of profits to bank's capital then for customer loans. 

Tech stocks rallied on the expectations of new markets for AI driven devices and demand for advanced semiconductors.  

Investors also reviewed the tight market for existing homes in July after home sales dropped to a six-month low. 

 

Home Sales Dropped to 6-month Low In July 

Existing home sales declined 2.2% from a year ago to a seasonally adjusted annual rate of 4.07 million, the National Association of Realtors reported Tuesday. 

Elevated mortgage rates and limited home inventories are keeping the number of transactions down. 

Single-family home sales declined 1.9% to 3.65 million units and condominium and coops dropped 4.5% to 0.45 million.  

Median existing home prices rose 1.9% to $406,700, and stayed above $400,000 for the fourth time. 

The inventory of existing homes rose 3.7%from the previous month to 1.1 million homes at the end of July, or about 3.3 months of unsold homes at the current monthly sales rate. 

 

U.S. Indexes & Yields 

The S&P 500 index traded down 0.3% to 4,387.55 and the Nasdaq Composite gained 0.06% to 13,505.87.  

The yield on 2-year Treasury notes increased to 5.03%, 10-year Treasury notes inched higher to 4.32% and 30-year Treasury bonds edged up to 4.41%. 

Crude oil increased $0.42 to $79.71 a barrel and natural gas prices decreased 5 cents to $2.54 a thermal unit. 

 

U.S. Stock Movers 

Lowe's Companies Inc increased 3.6% to $225.74 after the home improvement retailer reiterated its full-year outlook. 

Revenue in the quarter ending on August 4 declined to $24.96 billion from $27.5 billion and net income decreased to $2.67 billion from $2.88 billion and diluted earnings per share fell to $4.56 from $4.68 a year earlier.   

Dick's Sporting Goods Inc plunged 24.1% to $111.53 after the sporting goods retailer reported sharply lower earnings per share and the company blamed the shortfall to higher-than-usual theft. 

Dick's said fiscal second quarter revenue was $3.22 billion and diluted earnings per share was $2.82, sharply lower than some analysts estimate of as high as $3.79. 

The retailer also lowered its annual outlook. 

Macy's Inc declined 14.2% to $12.66 after the department store operator reiterated its cautious full-year outlook. 

Fabrinet soared 31.5% to $153.66 after the advanced manufacturing company reported better-than-expected quarterly results. 

Revenue increased to $655.9 million compared to $587.9 million and net income increased to $60.8 million from $56.2 million and diluted earnings per share rose to $1.65 from $1.51 a year earlier. 

Fabrinet's Board of Directors approved the repurchase of up to an additional $47.6 million of the company's ordinary shares, bringing the aggregate authorization under the existing share repurchase program to $294.8 million, with $100 million still available.