Volatile Wall Street: Market Recovered Value But Indices Fall Again
However, the indices quickly changed, and two hours later they fall.
However, all three remain below where they finished last week, pressured by rising bond yields. The US Treasury one-year note hit a new two-year high of 1.90% overnight, before retreating to 1.85%. But after almost two hours from the open, the indices are in the red, with falls between 0.25% and 0.49%.
There was no change in the narrative from last week to explain the move, but rather a sense that Tuesday’s sell-off had been overdone. Bond buyers were buoyed by better-than-expected financial and consumer sector results, while earlier homebuilding data also pointed to continued housing market strength despite overheating fears.
Housing starts rose 1.4% in December, reaching their highest level since March, while building permits rose 9.1%, just below their all-time high. The figures suggest that the rise in house prices over the past two years is finally sparking a supply response, with a striking increase in the number of multi-family homes being planned and built.
Bank of America (NYSE: BAC ) shares rose 2.7% and Morgan Stanley (NYSE: MS ) 1.6%, after both banks easily beat expectations that had lowered JPMorgan (NYSE: JPM ), Citigroup (NYSE: C ), and Goldman Sachs (NYSE: GS ) in the two previous sessions. These three stocks continued to lose ground on Wednesday, suggesting that the strength of the BofA and Morgan Stanley numbers was causing some rotation within the sector. In the financial sector, shares in SoFi jumped 12% after it finally got regulatory approval to become a bank, though it will have to steer clear of the cryptocurrency business some had hoped it would get into.
Dip buying extended even to Cathie Wood’s ARK Innovation ETF, which rose 2.1%. Still, it is down more than 50% from its 11-month high as investors spooked by rising discount rates, which disproportionately penalize bets on long-term growth, especially in the “tech without benefits” sector.
Shares of Microsoft (NASDAQ: MSFT ) rose 3.7% as investors digested the implications of its $69 billion deal to buy video game publisher Activision Blizzard (NASDAQ: ATVI ), which will make it the third-largest gaming company in the world by revenue.
There was also a good supply in luxury stocks after Swiss company Richemont (SIX: CFR ) beat expectations with its fourth-quarter figures. The Cartier and van Cleef owner enjoyed a relatively uninterrupted quarter for his boutique operations, lifting Richemont’s ADRs 6.5%. Burberry’s (LON: BRBY ) ADRs also rose 5.3% after the British house raised its full-year guidance.