Feb. 25 (UPI) — U.S. markets tumbled Thursday after two days of volatile trading earlier in the week amid rising government bond yields.
The Dow Jones Industrial Average closed the day down 559.85 points, or 1.75%, falling from a record high set Wednesday. The S&P 500 declined 2.45% and the Nasdaq Composite dropped 3.52%.
The 10-year treasury yield increased 0.2% to climb above 1.6% in a move some described as a “flash” spike, but ultimately settled near 1.5%,
The increase in the treasury yield also placed the benchmark rate above the S&P 500’s dividend yield resulting in equities losing their premium over bonds.
“If bond yields continue to rise, this could be bad news for stocks, as yield-seeking investors could make equally good or better returns by holding longer-dated government debt,” Fawad Razaqzada, market analyst at Think Markets, said in a note to clients, according to CNN.
In response to the rising yields, investors sought to dump risky assets, particularly tech stocks.
Facebook stock dropped 3.64%, Apple stock declined 3.48%, Alphabet lost 3.26%, and Microsoft slid 2.37%. Tesla stock also fell 8.06%.
All three major indexes ended the day with gains on Wednesday but reversed losses earlier in the day brought on by another spike in the yield.
“U.S. stocks will continue to closely take [their] cue from the trajectory of Treasury yields,” Edward Moya, senor market analyst at OANDA told CNBC. “The Nasdaq will continue to lead the slide lower, while some investors will prefer to continue the rotation back into REITs, consumer staples, financials and utilities.”
GameStop stock gained 18.56% on Thursday, rising for the second consecutive day following a surprise surge of more than 100% on Wednesday as the company announced Chief Financial Officer Jim Bell would resign next month.
Investors who continued to sell the stock short after a surge in January brought on by investors from the Wall Street Bets subreddit lost $1.85 billion over the two days, Business Insider reported.