Stock Market Today: Energy Leads, Tech Lags, As Interest Rates Keep Rising

The rotation into cyclicals and value was in full gear Monday as the 10-year Treasury yield briefly eclipsed 1.5% for the first time in months.

Oil rigs
(Image credit: Getty Images)

The new trading week kicked off Monday with various market sectors taking off in different directions.

Cyclical and value stocks continued their recent ascent. Exxon Mobil (XOM (opens in new tab), +3.0%) and Halliburton (HAL (opens in new tab), +5.4%) helped make energy (+3.6%) the strongest sector of the day, driven by a 2.0% increase in U.S. crude oil futures to a two-month high of $75.45 per barrel.

Declines in big-tech names such as Microsoft (MSFT (opens in new tab), -1.7%) and Nvidia (NVDA (opens in new tab), -1.9%) tried to pull markets in the other direction.

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"To oversimplify things, it comes down to the continued move higher in interest rates and the concentration of mega-cap tech stocks in the S&P 500," Michael Reinking, senior market strategist for the New York Stock Exchange, said in an afternoon note. "The value factor has underperformed the growth factor by ~15% since the middle of May. Today it is outperforming growth by almost 2%. The continued move higher in rates is at the center of this rotational activity."

Indeed, the 10-year Treasury yield has jumped from about 1.3% last Wednesday to just above 1.5% earlier today, reaching its highest level since July.

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The Dow Jones Industrial Average closed with a modest 0.2% gain to 34,869. The S&P 500 slipped 0.3% to 4,443, while the tech-heavy Nasdaq Composite finished down 0.5% to 2,282.

And what does the rest of the week have in store?

"The infrastructure and spending bills will certainly be a focus for investors this week, both for the short-term impact on market dynamics but also the long-term outlook for the U.S. economy," says David Keller, chief market strategist for StockCharts.com.

"From a technical perspective, the S&P 500 continues to trade around the 50-day moving average which has served as price support for much of 2021. The S&P remains in a constructive price pattern as long as it remains above the August lows around 4,360."

There's also a light earnings calendar that includes reports from a few noteworthy companies, including Micron (MU (opens in new tab)) and Bed Bath & Beyond (BBBY (opens in new tab)).

Other news in the stock market today:

  • The small-cap Russell 2000 stood out from the pack, leaping 1.5% to 2,281.
  • The rising 10-year Treasury yield also created tailwinds for bank stocks today, as higher interest rates often boost margins and profits for financial firms. Goldman Sachs (GS (opens in new tab), +2.3%), JPMorgan Chase (JPM (opens in new tab), +2.4%) and Bank of America (BAC (opens in new tab), +2.7%) were among the notable gainers.
  • Altice USA (ATUS (opens in new tab)) slid 5.8% after Credit Suisse analysts downgraded the broadband provider to Neutral from Outperform (the equivalents of Hold and Buy, respectively). They acknowledge that ATUS is trading lower than "its likely asset value and that management's pivot from focusing on margins and stock buybacks to a more aggressive fiber overbuild and edge-out strategy could prove successful longer-term." However, they expect this "new investment strategy will take at least several quarters, if not longer, to begin bearing fruit." As such, they are moving to the sidelines.
  • Gold futures eked out a marginal gain to settle at $1,752.00 an ounce.
  • The CBOE Volatility Index (VIX) jumped 6.0% to 18.82.
  • Bitcoin prices were up 1.5% over the weekend, to $43,040.80. "I don't think the market is factoring in how big the Evergrande default is," says Charlie Silver, CEO of Permission.io, a cryptocurrency-enabled provider of e-commerce permission advertising. "Evergrande is like a cockroach in your kitchen. There is never just one. The leverage in China is 3x what it is in the U.S., and it looks like there is going to be massive defaults rippling across the banking system globally. This will impact crypto significantly; the crypto market is in a wait-and-see mode." (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)

stock chart for 092721

(Image credit: YCharts)

Is October Going to Be Any Easier?

The volatile month of September will be behind us soon, but the volatility itself might not be.

A research team from wealth manager Glenmeade outlines two of the near-term risks facing the markets: "Currently the government is at risk of shutdown on Sept. 30 and the debt ceiling needs to be raised by mid-October," Glenmeade says. "If the ceiling isn't raised, the U.S. could default, making it more expensive for the Treasury to borrow money and could cause a credit rating downgrade – events that both parties would want to avoid."

The potential for additional market "wobble" might very well put a premium on safety plays, whether you're talking about financially stable stocks (opens in new tab) or low-volatility funds (opens in new tab).

But some investors prefer to check their shopping lists if they see volatility coming, and quick market drops can provide an opening to get already high-quality companies at slightly better prices.

Take the following five stocks to buy, for instance. Each of these companies boast solid balance sheets, cash generation and other healthful financial measures, but each has also been caught up in the market's latest tantrums.

Kyle Woodley was long NVDA as of this writing.

Kyle Woodley
Senior Investing Editor, Kiplinger.com

Kyle is senior investing editor for Kiplinger.com. As a writer and columnist, he also specializes in exchange-traded funds. He joined Kiplinger in September 2017 after spending six years at InvestorPlace.com, where he managed the editorial staff. His work has appeared in several outlets, including U.S. News & World Report and MSN Money, he has appeared as a guest on Fox Business Network and Money Radio, and he has been quoted in MarketWatch, Vice and Univision, among other outlets. He is a proud graduate of The Ohio State University, where he earned a BA in journalism.