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Feb 22, 2021

Tech drags Nasdaq 100 to three-week low; oil jumps

BNN Bloomberg's closing bell update: Feb. 22, 2021

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Tech stocks dropped on valuation concerns while commodities rallied and bond yields rose with investors pricing in stronger growth and faster inflation as the global economy recovers.

The Nasdaq 100 tumbled more than 2.5 per cent to a three-week low as investors questioned the appeal of expensive, growth-focused stocks. The S&P 500 Index fell for a fifth day, its longest losing streak in a year. Gains for energy shares and financial companies limited losses on the Dow Jones Industrial Average. European and Asian markets were broadly negative.

Commodities were almost uniformly green. Brent oil climbed above US$65 a barrel as Goldman Sachs Group Inc. predicted prices could advance into the US$70s in coming months. Copper briefly rose above US$9,000 a metric ton for the first time in nine years, taking another step closer to an all-time high set in 2011 as investors bet that supply tightness will increase as the world recovers from the pandemic.

After a tremendous run from the depths of the pandemic selloff 11 months ago, stocks are under scrutiny as an increase an interest rates bolsters the appeal of fixed-income investments.

“Long-duration assets are the ones that are most vulnerable in a rising interest rate environment,” said Scott Knapp, chief market strategist of CUNA Mutual Group. “The exact same stocks that led the market higher when interest rates were plummeting are the ones most vulnerable when interest rates rise.”

Treasury yields climbed and a key part of the curve -- the gap between 5- and 30-year yields -- touched the highest level in more than five years. Yields rose in Asia, while European government yields reversed an advance and edged lower.

Elsewhere, Brazilian markets tumbled following President Jair Bolsonaro’s decision to replace the head of Petroleo Brasileiro SA, the state-controlled oil company. The real fell 1 per cent and the Ibovespa stock gauge dropped almost 5 per cent.

Bitcoin slumped more than 10 per cent at one point as prices pulled back from an all-time high.

Some key events to watch this week:

- Fed Chair Jerome Powell delivers the central bank’s semi-annual monetary policy report to the Senate Banking Committee on Tuesday.

- EIA crude oil inventory report is out Wednesday.

- Finance ministers and central bankers from the Group of 20 will meet virtually Friday. U.S. Treasury Secretary Janet Yellen will be among the attendees.

These are some of the main moves in markets:

Stocks

- The S&P 500 Index declined 0.8 per cent as of 4 p.m. New York time.

- The Stoxx Europe 600 Index fell 0.4 per cent.

- The MSCI Asia Pacific Index dipped 0.8 per cent.

- The MSCI Emerging Market Index declined 2.2 per cent.

Currencies

- The Bloomberg Dollar Spot Index fell 0.1 per cent.

- The euro climbed 0.3 per cent to US$1.2156.

- The British pound increased 0.3 per cent to US$1.4062.

- The Japanese yen gained 0.4 per cent to 105.07 per dollar.

Bonds

- The yield on 10-year Treasuries rose three basis points to 1.36 per cent.

- Germany’s 10-year yield fell three basis points to -0.34 per cent.

- Britain’s 10-year yield fell two basis points to 0.68 per cent.

Commodities

- West Texas Intermediate crude gained 3.8 per cent to US$61.49 a barrel.

- Gold strengthened 1.4 per cent to US$1,809.63 an ounce.

--With assistance from Vinícius Andrade, Sophie Caronello and Andreea Papuc.

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