By David French
(Reuters) – The S&P 500 and the Nasdaq Composite fell on Friday and posted their second straight weekly losses, as hotter-than-expected U.S. producer prices data pushed Treasury yields higher and sank rate-sensitive megacap growth stocks.
The Dow Jones Industrial Average closed higher for the day and ended the week up 0.6%. It was the first time in 2023 that the Nasdaq fell for two straight weeks. The S&P 500 ended the week down 0.3%, with the Nasdaq 1.9% lower.
The U.S. government reported that the producer price index (PPI) climbed 0.8% in the 12 months leading to July, up from a 0.2% rise in the previous month, as costs of services increased. Economists polled by Refinitiv had expected a 0.7% gain.
Though traders broadly expect the Federal Reserve to refrain from tightening credit conditions for the rest of the year, bets for no rate hike in September slipped to 88.5% from 90% before the data landed. [IRPR]
“We’ve seen some material news and data in recent days but the market has chosen to trade sideways, which tells us that the market had priced in everything and has not been pleasantly or unpleasantly surprised,” said Jason Betz, private wealth advisor at Ameriprise Financial.
Yield on the two-year U.S. Treasury note, that moves in line with near-term interest rate expectations, climbed to 4.88%.
This move weighed on big tech names, as high interest rates could slow the economy and dent the ability of these firms to achieve the growth projections which have pushed them to premium valuations. Higher rates can also make interest-bearing bonds an attractive alternative to stocks for some risk-averse investors.
Tesla, Meta Platforms Inc and Microsoft closed down between 0.6% and 1.3%.
A 3.6% fall in Nvidia weighed on the semiconductor index, which was 2.3% lower. It was the fourth straight decline and its eighth loss in nine sessions for the semis index, and its 5% weekly decline was its worst performance since early April.
Megacap growth and technology stocks have led outsized gains this year in the tech-heavy Nasdaq and the S&P 500. But after a five-month stretch of advances, August has so far been marked by a more cautious approach from investors.
“Time will tell if we are correct on this, but with the run that tech has had, it’s hard not to want to do a bit of profit-taking,” said Ameriprise’s Betz.
The Dow Jones Industrial Average rose 105.25 points, or 0.3%, to 35,281.4, the S&P 500 lost 4.78 points, or 0.11%, to 4,464.05 and the Nasdaq Composite dropped 76.18 points, or 0.56%, to 13,644.85.
Amid the major S&P sectors, healthcare and energy sectors advanced. Both have been among the worst performing industries this year, although energy matched its strongest run this year by closing higher for the seventh straight session.
The energy sector’s 1.6% increase was aided by crude prices rising on forecasts for tightening supplies from the International Energy Agency. Occidental Petroleum Corp was among the biggest gainers, up 3.3%, after one of its units secured a grant from the U.S. government to support its carbon capture ambitions.
Among other movers, News Corp rose 4.6% after the Rupert Murdoch-owned media conglomerate beat quarterly profit estimates, thanks to its cost-cutting efforts.
U.S.-listed shares of Chinese companies Alibaba and JD.com fell 3.5% and 5.3%, respectively, as Beijing’s latest stimulus measures disappointed investors, while fresh data showed that the country’s post-pandemic recovery was losing steam.
Volume on U.S. exchanges was 10.19 billion shares, compared with the 10.93 billion average for the full session over the last 20 trading days.
The S&P 500 posted 4 new 52-week highs and 3 new lows; the Nasdaq Composite recorded 52 new highs and 169 new lows.
(Reporting by Bansari Mayur Kamdar and Johann M Cherian in Bengaluru and David French in New York; Additional reporting by Shashwat Chauhan; Editing by Vinay Dwivedi and David Gregorio)