Day Traders Diary

2/6/23

The major averages fell on Monday as investors grew increasingly cautious of rising bond yields while watching latest batch of corporate earnings. The Dow Jones Industrial Average lost 34 points, or 0.1%, making up some ground after losing more than 240 points earlier in the session. The S&P 500 lost 25 points or 0.6, while the Nasdaq Composite dropped 119 points or 1%.

Investors were taking some profits after the stock market's hot start to the year. The S&P 500 is up more than 7% for 2023, while the Nasdaq Composite has advanced for the last five weeks, a streak not seen since November 2021.

Treasury bond yields rose, with benchmark 10-year yield was up by 10 basis points at 3.632% and the 2-year yield adding around 16 basis points to 4.456%. The ICE U.S. Dollar Index rose as much as 0.76% Monday, further contributing to the decline in stocks.

"Most stock market participants are a little shook ... by the huge increase in yields for a second straight day," said George Cipolloni, portfolio manager at Penn Mutual Asset Management. "The move in the 2-year over two days is incredible. And I think that's driving most of the moves."

Tyson Foods fell 5% on the back of a weaker-than-expected earnings report. The Children's Place, a kids' apparel retailer, lost nearly 4% after it pulled back its outlook for its fourth quarter.

Apple shed nearly 2%, pressuring the Dow as concerns over higher rates weighed on some tech stocks. Retail stocks Target

 and Nike also traded down, while defensives such as Merck

 and Coca-Cola advanced. Disney, Chipotle, Dupont and PepsiCo are among the major companies reporting earnings this week, which investors will be watching for any indications that prior interest rate hikes have hurt companies' finances. With the earnings season about halfway over, profits for S&P 500 companies are on pace to be 2.7% lower for the fourth quarter, according to Refinitiv.

"Last week was kind of all about monetary policy and the Fed, the European Central Bank and the Bank of England," said Tom Hainlin, the U.S. head of global investment strategy of U.S. Bank's Ascent Private Capital Management. "This is really about corporate America and what they're seeing."

Investors will also watch Tuesday for Federal Reserve Chairman Jerome Powell's remarks before the Economic Club of Washington. Powell's comments on disinflation caused investors to bid shares higher last week and overlook another rate hike out of the central bank.