Stock Market Today: Inflation Fears Wreck Tech Again

A jump in the yield on the benchmark U.S. 10-year Treasury note heightened inflation fears, and high-flying stocks in the technology sector once again paid the price.

Stocks going lower
(Image credit: Getty Images)

Rising bond yields put heavy pressure on technology stocks Thursday, a day after the Dow Jones Industrial Average surpassed 33,000 for the first time in history thanks to dovish comments from the chairman of the Federal Reserve.

The see-saw trade is emblematic of a market trying to balance optimism about robust future economic growth and fears that rapid expansion could spark a profit-sapping wave of inflation.

The proximate cause for Thursday's selloff was the yield on the benchmark Treasury note hitting a 14-month high. But the equity strategy team at Bank of America Global Research says the bond market's inflation fears are both predictable and overwrought.

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"There is always some reason or the other since the start of this bull market to complain or worry about," the BofA analysts wrote in a note to clients. "That's why bull markets climb a wall of worry. The latest worry is rising bond yields and inflation. Interestingly, we have gone from all that skepticism about no V-shaped recovery straight to the opposite end -- inflation! All within a few months. Worriers are going to worry."

Priced-to-perfection big tech stocks once again bore the brunt of the selling, with Apple (AAPL, -3.4%) and Microsoft (MSFT, -2.7%) among the Dow's biggest laggards. (AMZN, -3.4%) and Google-parent Alphabet (GOOGL, -2.9%) likewise took their lumps.

The blue-chip Dow slipped 0.5% to finish at 32,862, while the broader S&P 500 fell 1.5% to 3,915. The tech-heavy Nasdaq Composite tumbled 3.0% to settle at 13,116.

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In economic news, weekly jobless claims rose to 770,000 from 725,000 a week ago.

Other action in the stock market today:

  • The small-cap benchmark Russell 2000 declined 2.9% to 2,267.
  • U.S. crude oil futures declined for a fifth consecutive session, off 8.2% to $59.28 per barrel.
  • Gold futures ticked up 0.4% to $1,734 an ounce.
  • The U.S. Dollar Index rose 0.5% to 91.86.

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(Image credit: YCharts)

Don't just do something; stand there

When the federal government is pumping almost $2 trillion into the economy, it's easy for investors to feel like they must act.

Rising borrowing costs, incipient margin pressure, higher inflation expectations or the perennial "fear of missing out" are just some of the anxieties gnawing on the market's increasingly brittle psyche these days.

Partly that's due to an overabundance of choices for how to profit in these pivotal times. For example, analysts have identified a load of stocks set to benefit from both an increase in revenue from stimulus spending and an influx of retail investors' stimulus checks. Stockpickers are also full of ideas for how to play the reflation trade, or names set to take off thanks to a healthy general rise in prices. And then there are all the ways in which to take advantage of changes in federal spending priorities, such as stocks primed to outperform on a massive infrastructure push.

When confronted with an almost exhausting number of choices, it's not a bad idea to remember first principles. Namely, a rising tide lifts all boats.

Rather than lose sleep trying to pick the winners from the losers, consider cheap, diversified investments that offer ample exposure to any upside, as well as a cushion against any downside. Take a deep breath, and consider senior investing editor Kyle Woodley's 21 ETF picks for 2021 -- there's an ETF play for every investing objective.

Dan Burrows
Senior Investing Writer,

Dan Burrows is Kiplinger's senior investing writer, having joined the august publication full time in 2016.

A long-time financial journalist, Dan is a veteran of SmartMoney, MarketWatch, CBS MoneyWatch, InvestorPlace and DailyFinance. He has written for The Wall Street Journal, Bloomberg, Consumer Reports, Senior Executive and Boston magazine, and his stories have appeared in the New York Daily News, the San Jose Mercury News and Investor's Business Daily, among other publications. As a senior writer at AOL's DailyFinance, Dan reported market news from the floor of the New York Stock Exchange and hosted a weekly video segment on equities.

Once upon a time – before his days as a financial reporter and assistant financial editor at legendary fashion trade paper Women's Wear Daily – Dan worked for Spy magazine, scribbled away at Time Inc. and contributed to Maxim magazine back when lad mags were a thing. He's also written for Esquire magazine's Dubious Achievements Awards.

In his current role at Kiplinger, Dan writes about equities, fixed income, currencies, commodities, funds, macroeconomics, demographics, real estate, cost of living indexes and more.

Dan holds a bachelor's degree from Oberlin College and a master's degree from Columbia University.

Disclosure: Dan does not trade stocks or other securities. Rather, he dollar-cost averages into cheap funds and index funds and holds them forever in tax-advantaged accounts.