Major indexes are lower amid a rise in bond yields.
Portfolio Pulse from Benzinga Newsdesk
Major stock indexes have declined due to an increase in bond yields, which typically leads to a shift in investor preference from stocks to bonds as they become more attractive.
January 03, 2024 | 3:45 pm
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NEGATIVE IMPACT
The SPDR Dow Jones Industrial Average ETF (DIA) is likely to experience a short-term negative impact due to the rise in bond yields as it tracks the Dow Jones Industrial Average, which is sensitive to such economic indicators.
As bond yields rise, investors may find bonds more attractive compared to stocks, leading to a potential sell-off in the stock market, which would negatively impact DIA.
CONFIDENCE 85
IMPORTANCE 70
RELEVANCE 80
NEGATIVE IMPACT
The iShares Russell 2000 ETF (IWM), which tracks the performance of the small-cap Russell 2000 index, may see a short-term downturn as higher bond yields can disproportionately affect smaller companies.
Higher bond yields often result in higher borrowing costs, which can be more challenging for small-cap companies that IWM represents, potentially leading to a decrease in their stock prices.
CONFIDENCE 80
IMPORTANCE 65
RELEVANCE 75
NEGATIVE IMPACT
Invesco QQQ Trust (QQQ), which includes tech-heavy, growth-oriented stocks, may face a short-term decline as rising bond yields can lead to a revaluation of growth stocks, which are more sensitive to interest rate changes.
Growth stocks, like those in QQQ, are often valued based on future earnings, which can be discounted more heavily as bond yields rise, leading to potential short-term price declines.
CONFIDENCE 90
IMPORTANCE 75
RELEVANCE 85
NEGATIVE IMPACT
SPDR S&P 500 ETF Trust (SPY) may be negatively impacted in the short term as the rise in bond yields could lead to a broader market sell-off, affecting this ETF that tracks the S&P 500.
The SPY ETF, which mirrors the S&P 500, is likely to follow the broader market trend, and a rise in bond yields typically leads to a decrease in stock prices as investors move to the relative safety of bonds.
CONFIDENCE 85
IMPORTANCE 80
RELEVANCE 90