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By Nicholas
Jasinski | Thursday, January 6 Bond
Bitterness. Bond yields
continued their early 2022 march higher today, with the 10-year
U.S. Treasury yield settling at
1.73%. That same yield was below 1.4% just three weeks ago. It's not a big
move in absolute terms, but means that the benchmark yield has moved
some 25% higher since just before Christmas. The S&P
500 slipped 0.1% today, the Dow
Jones Industrial Average lost 0.5%, and the Nasdaq Composite stabilized
after several days of declines, finishing down 0.1%. The recent spike in bond yields has been
rough for long-duration growth stocks, while boosting value stocks. The Vanguard
S&P 500 Value exchange-traded fund (VOOV) is up nearly 1%
since the start of the week, versus a 3.5% decline for the Vanguard
S&P 500 Growth ETF (VOOG). The index as a whole is down 1.4%
since Monday. Banks and energy stocks have done
particularly well so far this year. The Invesco
KBW Bank ETF (KBWB) and the Energy
Select Sector SPDR ETF (XLE) are each up about 9%. The ARK
Innovation ETF (ARKK), meanwhile, has slid 9%. That ETF is
packed with high-multiple growth stocks like Tesla, Coinbase Global, Teladoc Health, and Zoom
Video Communications. Bond yields have been on the rise lately as
concerns about the Omicron variant's negative impact on the economy have
dissipated. That means the Federal
Reserve won't be likely to scale
back its policy tightening plans for this year. In fact, the minutes from the
Federal Open Market Committee's December
meeting, which came out Wednesday, suggested the risk could be in the other
direction. Policy makers were more hawkish than many investors seemed to be
expecting. The past week has been a microcosm of thesis
elaborated in Barron's 2022
market outlook last month: Higher interest rates will
put pressure on pricey stocks, and companies with more near-term cash flows
and lower valuations should outperform. For bond investors, there's little to
like in traditional corners of the market. But we're far from done yet. Post-market action today centered on
a familiar meme stock: GameStop. Shares
spiked more than 30% in thin after-hours trading after news emerged that the
video-game retailer's turnaround effort was taking it
into cryptocurrencies and non-fungible tokens. Barron's Connor
Smith has
more here. On deck for tomorrow morning is the December employment
report from the Department
of Labor. On average,
economists are expecting to see a gain of 440,000 nonfarm payrolls
last month, after a gain of 210,000 in November. That December estimate has creeped up
lately. On Wednesday, payroll provider ADP released
private-sector employment figures for December that more than
doubled forecasts. Investors and economists hoping to judge the
impact of the Omicron variant on the jobs market won't have a lot to take
away from the December jobs data. That’s because the monthly surveys are
conducted around the second week of each month. In the first half of December, the
variant was still new in the U.S. Investors and economists will be more
interested in the January and February jobs numbers to judge
Omicron's impact on the economy. Barron's is now accepting nominations for the third
annual Barron's 100 Most Influential Women in U.S. Finance.
The deadline for submissions is Jan. 15, 2022. Apply here. |
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