© Reuters.
By Yasin Ebrahim
Investing.com – The S&P 500 pared its losses Friday, as cyclical sectors continued to rack up gains as the reflation trade gathers pace in the wake of rising Treasury yields.
The rose 0.05%, the gained 0.03%, or 11 points, the Nasdaq slipped 0.19%.
Cyclical sectors are back in demand as investors renew bets on the reflation trade – stocks that move in tandem with economic growth, inflation and Treasury yields following a climb in Treasury yields. The 10-year yield rose to 1.45% for the first time since early July.
“The reflation trade is reflating, as 10-year yields break through some initial resistance,” said Mark Luschini, chief Investment strategist at Janney Montgomery Scott in a note. “Small-caps, value stocks, and banks/financials … continue to be powered by a strong correlation to trends on the Treasuries.”
Rising yields – supported by expectations for tighter Federal Reserve monetary policy has steadied fears about the economy at a time when concerns about Chinese real estate developer Evergrande continue to linger. Evergrande was due to make $84 million in coupon payments on Thursday, but bondholders are still waiting on it.
“Focus on the 10-year treasury … that’s a key indicator of a global economy that is doing well,” Darren Schuringa, CEO of ASYMmetric ETFs told investing.com earlier this week. “Longer-term, we need strengthening global GDP growth to sustain the rally [in equities].
Energy and financials were the biggest gainers on the day, with latter benefiting from an ongoing move higher in bank stocks.
Lincoln National (NYSE:), Raymond James Financial (NYSE:), Truist Financial Corp (NYSE:) were up more than 1%
In tech, Facebook (NASDAQ:) continued to recover losses from earlier this week, helping the broader tech sector pared some of its intraday losses.
Roku (NASDAQ:) slipped 4% after Wells Fargo downgraded the company to equal weight from overweight, and cut its price target on the stock to $350 from $488, citing expectation for slower revenue growth ahead.
Nike (NYSE:) cut its revenue forecast amid ongoing supply chain issues that led to a fiscal first-quarter revenue miss, sending the sportswear giant’s shares down 6%.
Still, some on Wall Street believe the slump in Nike is a buying opportunity.
“We expect supply chain issues to prove transitory and recommend clients use any related nearer-term share price weakness as a buying opportunity,” Oppenheimer said in a note.
In other news, cryptocurrency-related stocks were hurt by a further crackdown on crypto in China.
China’s central bank deemed all digital currency activities illegal and vowed to crack down on the market.
Robinhood Markets (NASDAQ:), Coinbase (NASDAQ:), Marathon Digital (NASDAQ:) were in the red.
Read More: S&P 500 Cuts Losses as Yield Surge Renews Bets on Reflation Trade By