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By Shashank Nayar and Medha Singh
(Reuters) – It declined from a record high on Thursday as technology Nasdaq increased more than 1% when bond yields peaked at 14 months after the Federal Reserve promised to endure inflation and release monetary policy until 2023 to keep.
The yield on the standard 10-year notes crossed 1.75% for the first time since January 2020, which the growing companies including Apple Inc (NASDAQ :), Facebook Inc. (NASDAQ :), Netflix Inc (NASDAQ :), Amazon.com Inc (NASDAQ 🙂 and Microsoft Corp. (NASDAQ 🙂 fell between 1.2% and 1.6%.
Technical equities are particularly sensitive to rising returns because their value is heavily based on future earnings, which are discounted more deeply as yields of bonds rise.
The blue-chip Dow reached another record a day after the Fed predicted the strongest growth in nearly 40 years, while the COVID-19 crisis subsided, reiterating its promise to keep its target interest rate for years to come.
Opinions among the 18 current Fed policy makers have shifted somewhat, with four now expecting rates to rise next year and seven to get a rate hike in 2023.
“It’s a slight increase in policymakers to think that there may be a shift sooner that increases the effect on the bond market and raises returns higher,” said Fiona Cincotta, senior financial analyst at the financial market at Gain Capital in London.
While inflation is expected to exceed the Fed’s 2.0% target to 2.4% this year, Fed Chairman Jerome Powell sees it as a temporary surge that will not change the central bank’s stance.
A $ 1.9 billion management stimulus has fueled fears of rising inflation, boosting the Treasury’s long-term returns, accelerating the conversion of value stocks at the expense of high-tech technology stocks.
Economic data was mixed on Thursday with one showing that the number of U.S. applications for unemployment benefits rose unexpectedly last week. A separate report indicated that the Philly Fed business index has risen more than expected to the highest level since 1973.
“If economic data is better than expected before the stimulus tests reach the bills and the reopening takes effect, the economy will get warmer from there,” Cincotta added.
At 10:04 ET, the 12.72 points or 0.04% dropped to 33,002.65, the S&P 500 lost 24.55 points, or 0.62%, to 3,949.57 and the lost 205.08 points, or 1.52%, to 13,320.12.
Bank shares, which are sensitive to economic prospects, rose 2.4%, while sectors could benefit most from a reopening economy, including financial and industrial industries, which were close to overall highs.
In the corporate news, Accenture (NYSE 🙂 jumped about 5% after the IT consulting firm increased its revenue forecast for the full year and reported second-quarter revenue above analysts’ estimates as more businesses use their digital used services to move the operations to the cloud.
Dollar General Corp. (NYSE 🙂 fell 4.5% after the company forecast annual sales in the same store and profit below estimates, suggesting that the storms pandemic-seeking for groceries would drop faster than expected is.
The so-called meme stock AMC Entertainment (NYSE 🙂 rose 2.6% after the movie theater operator said it would have 98% of its U.S. establishments as of Friday.
Declining issues were more than 1.9 to 1 on the NYSE and the Nasdaq.
The S&P 500 posted 44 new highs of 52 weeks and no new lows, while the Nasdaq recorded 118 new highs and 22 new lows.