Nasdaq 100 Routed as Yields Rise, Earnings Add to Disappointment

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Tech stocks came under pressure during trade as fears over rising yields permeated the market. Just minutes after the opening bell, the yield on the US 10Y Treasury surpassed the dividend yield of the S&P 500, sending markets into retreat. The Nasdaq 100 Index finished the day down 478 points, or 3.43%.

Nasdaq 100 1 Minute Chart

Nasdaq 100 Routed as Yields Rise, Earnings Add to Disappointment

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Elsewhere, AirBnb posted a mixed earnings report after the close on Thursday, beating revenue expectations but missing earnings estimates. The steep Q4 loss was fueled by the COVID-19 pandemic, but also stock compensation charges tied to the company’s IPO. Shares however, moved higher in the afterhours session despite the disappointing EPS print.

AirBnb 1 Minute Chart

Nasdaq 100 Routed as Yields Rise, Earnings Add to Disappointment

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DoorDash reported its first earnings following the company’s recent IPO. Despite beating revenue estimates for Q4, DoorDash missed EPS estimates by $2.00, posting GAAP EPS of -$2.67. The company also reported a significant loss of $312 million, most of which was attributed to the company’s IPO and stock compensation. Revenues, which beat estimates, represented y/y growth of 226%. The stock, which was down 5% during trade, extended its losses and fell 11% during the afterhours session.

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Rising inflation expectations have sent bond yields soaring in recent weeks, although current levels remain low from a historical perspective. The move in yields has seen a significant shift in investor sentiment, with speculative growth stocks leading the decline. AUD/USD and GBP/USD lead declines in the FX space, while some growth-linked commodities continued to soar higher. The significant reallocation reflects increasing concern about rising yields and their impact on valuation, which according to many was already “stretched.”

The recent pullback in equities comes against a backdrop of unprecedented macro-growth. Sectors that lagged considerably during the height of the pandemic have blossomed as the world beings to reopen. Recent vaccine developments and promising economic data have relieved pressure from certain areas of the market, as investors begin to look to a “post-COVID” environment. Financials, energy, and small-caps all took a breather on Thursday, despite strongly outperforming the broader market in recent weeks. To learn more about the recent reallocation of capital, check out an earlier piece from Peter Hanks here.

— Written by Brendan Fagan, DailyFX Intern

To contact Brendan, reach out on Twitter @BrendanFaganFX