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Dow Jones climbs nearly 200 points but Nasdaq drops again as rate hike divides market

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The Nasdaq Composite fell for the second day in a row as higher interest rates appeared to put pressure on high-tech stocks, but shares of banks and industry names rose on Tuesday in a divided market.

The technology index fell 0.50% to 15,775.14, while the S&P 500 rose 0.17% to close at 4,690.70. The Dow Jones Industrial Average rose 194.55 points to 35,813.80 on the strength of banking and energy stocks.

The drop in tech and other growth stocks comes as Treasury yields surged following President Joe Biden’s decision to select Fed Chairman Jerome Powell for a second term on Monday. Higher rates are often seen as negative for high growth companies because their future profits look less attractive as short-term returns rise.

“We’ve seen slight pressure on tech stocks as long-term government bond yields have rallied for the second day now. It’s weighing on valuations. Profits from the zoom didn’t help today. , highlighting some of the momentum in these very high growth regions of the market as growth slows at the margins, ”said Angelo Kourkafas, investment strategist at Edward Jones.

Social media giant Meta, Facebook’s parent company, fell 1.1%, while Roku and biotech stock Moderna fell more than 2%. Zoom Video Communications shares fell 14.7% per day after beating earnings estimates, but warned of a coming slowdown as the Covid pandemic ends and demand for remote contact declines

On the other hand, bank stocks rose along with rates, with JPMorgan stocks adding nearly 2.4%.

Energy stocks climbed even after President Joe Biden on Tuesday announced he would tap the Strategic Oil Reserve in an attempt to push down gas prices at a time when inflation is at its highest level in three decades. The price of oil had fallen in recent days amid rumors that Biden would take that step, but reversed upward on Tuesday.

Powell’s re-appointment was generally welcomed by Wall Street, but movements in the Treasury market were abrupt. The benchmark 10-year Treasury yield traded near 1.67% on Tuesday, compared to around 1.54% on Friday. Yields move in opposition to prices.

“With a Fed led by Powell, we expect the speed of the decline in QE to follow the data, likely accelerating if the inflation numbers continue to keep pace with the October print with increases interest rates that will soon follow the decline (June at current rate) The market believes this action will allow the Fed to control inflation, ”Aptus Capital Advisors portfolio manager John Luke Tyner said in a note to customers.

“As the market expects a more hawkish response to current inflation, time will tell if that will be enough, as Powell is well established in the conciliatory camp of FOMC politics,” he added. .

In other earnings news, Best Buy shares fell 12.3% after the company said comparable sales and gross profit could decline in the fourth quarter compared to the same time of year. last.

On the bright side, chipmaker Western Digital was one of the top performers on Tuesday, up 6.3% following an upgrade from Mizuho.

Tuesday marked the second straight day of decline for the Nasdaq, which fell 1.26% on Monday. The index is still positive for the month.

CNBC Pro Stock Selections and Investment Trends:

While trade is likely to slow because it’s Thanksgiving week and the Fed’s main decision is behind the market, investors will be watching some economic data that comes out later in the week, including weekly jobless claims. , an update of GDP, personal income and consumer confidence. .

Investors are also juggling concerns about the coronavirus overseas. German Chancellor Angela Merkel warned on Monday that the country was witnessing a peak in the virus.

US markets will be closed for the Thanksgiving holiday on Thursday. The stock market closes early at 1 p.m. ET on Friday.

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