The Dow Jones Industrial Average is crushing technology stocks Thursday.
The Dow is up 257 points, or 0.7%, while the tech-heavy Nasdaq Composite is down 1.5%. The S&P 500 is down 0.4%. The Dow is outperforming the Nasdaq by more than 2 percentage points, which would represent its largest one-day outperformance since October 2022.
It’s all about interest rates.
The 10-year Treasury yield rose to about 3.86% from just below 3.8% earlier in the day after jobless claims came in lower than economists had anticipated. A resilient labor market indicates that economic demand and inflation may remain firmer than previously expected. That means the Federal Reserve may have to lift short-term interest rates one or two more times, which is bringing longer-term yields higher.
The higher rates and the assumption that demand remains strong for the moment is lifting the Dow. The index’s stocks are largely more economically-sensitive than the stocks in the other two major indexes.
Meanwhile, higher rates are particularly damaging to tech stocks. Higher long-dated bond yields make future profits less valuable — and many tech companies are fast-growing, so they’re valued on the basis that they’ll produce a bulk of their profits many years in the future.
Source: https://www.barrons.com/livecoverage/stock-market-today-072023/card/dow-outperforms-nasdaq-it-s-all-about-rates–yDxSEjML5S59rRpzZNNc?siteid=yhoof2&yptr=yahoo