Stocks dropped on Friday afternoon, as gains made earlier in the day on hopes for diplomatic progress between Russia and Ukraine turned to losses. Technology stocks were hit particularly hard by higher bond yields.
Dow Jones Industrial Average
fell 230 points, or 0.7%. Meanwhile, the
dropped 1.3% and 2.2%, respectively. All three indexes began the day with gains before selling off.
Friday’s performance was part of a larger shift. For the week, the Dow, S&P 500 and Nasdaq fell 2%, 2.9%, and 3.5%, respectively.
Investors took profits on Friday while they could ahead of the weekend, explained Tom Essaye, founder of Sevens Report Research. Saturday and Sunday could easily bring unfortunate news on the war front—and traders would rather be able to sell any recent winnings at Friday’s earlier prices than wait for a potentially lower price at Monday’s open.
Markets continued to grapple with the economic and corporate earnings implications relating to the Russia-Ukraine conflict. “We have a ton of uncertainty right now,” said Stephanie Link, chief investment strategist and portfolio manager at Hightower Advisors. “We’re dealing with a war, we’re dealing with inflation. We don’t know what it means to earnings.”
The last couple days have exemplified that uncertainty. On Thursday, news emerged that talks in Turkey between the Russia and Ukraine yielded no positive result. But on Friday, Reuters reported that Russian President Vladimir Putin said there had been some “positive shifts” in talks between the two sides.
There was another possible development: Reuters also reported that Ukraine said that Belarus could soon join the invasion of Ukraine. However, the AFP, citing a Pentagon official, said the U.S. hasn’t yet seen evidence that Belarusian troops are in Ukraine.
Overall, extreme levels of fear in the market seems to have morphed into something more resembling concern. For example, the
Cboe Volatility Index
fell from its 2022 peak of 36, which it hit Monday, to around 30 on Friday, a sign of easing tensions. Meanwhile, while the price of WTI crude oil slipped from Sunday’s multiyear high $130 of barrel to $109 a pop. Markets have been expecting heavy restrictions on Russian oil, some of which the U.S. has already imposed, and that would reduce the global supply and bring about even more burdensome inflation.
And while money initially moved into stocks in the morning, capital moved out of safe-haven assets. The price of the 10-year Treasury note fell Friday, sending its yield up to 2% from a March closing low of 1.73%.
That hurt tech stocks. For the past few weeks, the 10-year yield has traded between 1.72% and 2%, as traders moved into the bond for safety when Russia headlines were ugly—and out of it when headlines improved. Now, the yield is touching its pandemic-era high. If the yield breaks above that level, that could signal that it’s on a sustainable path higher. Higher long-dated bond yields make future profits less valuable—and many tech companies are valued on the basis of profits forecast for many years in the future.
For tech stocks, “the main thing is yields,” Essaye said.
The picture was mixed overseas. Hong Kong’s
Hang Seng Index
fell 1.6%, under pressure from U.S. regulatory scrutiny on New York-listed Chinese companies. Stocks were more buoyant in Europe, where Frankfurt’s
These five stocks were on the move Friday:
(ticker: DIDI) saw its U.S.-listed stock slump 44.1% after a report from Bloomberg said the company suspended preparations for its planned stock listing in Hong Kong.
(ORCL) closed up 1.5% after the software company posted financial results in line with the company’s own forecasts late Thursday, and provided an April quarter profit forecast ahead of Wall Street’s estimates. Shares in German peer
(SAP) fell 0.8%, with analysts noting that
results indicated a positive read-across for the wider sector.
(RIVN) stock dropped 7.6% after the electric-vehicle maker reported a loss of $4.83 a share, wider than estimates of $2, on sales of $54 million, below expectations for $64 million. The company also said it will manufacture 25,000 vehicles this year, below expectations for 50,000.
(DOCU) stock fell 20.1% after the company reported earnings per share that were in line with analysts’ estimates and sales that beat. But the company said it expects full year sales of $2.48 billion, below expectations for $2.61 billion.