US equities dropped last Fri. Major technology and internet stocks again fell the hardest, with rising Treasury yields getting the blame. The Nasdaq Composite dropped another 0.96% on Fri. The tech-heavy index is down 4.5% in the first five trading days of 2022.
The broader S&P 500 Index fell 0.41% on Fri, registering its first four-day losing streak since Sept. Meanwhile, the Dow Jones Industrial Average continues to outperform. The Dow lost 4.81 points, or about 0.01%, to close at 36,231.66. Last week, the Dow only dropped 0.29%, versus a 1.8% drop in the S&P 500.
The 10-year Treasury yield rose 4.09 basis points (bps) to 1.7620% on Fri. At one time it breached the 1.80% mark. At the start of the year, the 10-year yield was 1.51%.
Yields normally drop when there is disappointing economic data, so Fri’s move in Treasury yields was a bit of a surprise. The headline number in the December US jobs report a bummer. The economy only created 199,000 jobs last month, way below consensus estimates for 450,000.
However, the jobs report did show that the US Labor market remains tight. The unemployment rate dropped from 4.2% to 3.9%, near the 50-year low of 3.5% reached in Feb 2020 when the pandemic began. Wages climbed 0.6% in Dec and were up 4.7% year over year.
Fixed income traders expect the Fed to raise interest rates to cool inflation. Overnight index swaps are now pricing in about an 88% chance of an interestrate hike as early as in Mar, according to data compiled by Bloomberg.
The most actively traded US gold futures (Feb) contracts settled up $8.20, or 0.5%, at US$1,797.40/oz. March silver, which is the most actively traded silver futures, rose 21.9 cents, or 1.0%, to end at US$22.409/oz.
The ICE dollar index (DXY), which measures the strength of the greenback against a basket of currencies, fell 0.62% to 95.719.
The front-month Brent and WTI futures closed down 24 cents at US$81.75/bbl and 56 cents at US$78.90/bbl respectively.
European equity markets finished mixed on Fri. The UK FTSE gained 0.47%, France's CAC 40 fell 0.42%, while the German DAX retreated 0.65%