Stocks resume declines, tech shares extend drop

Stocks opened lower on Wednesday to pick up declines from the past week, with tech shares still under pressure.

The S&P 500, Dow and Nasdaq fell Wednesday morning, and the Nasdaq underperformed. Stocks ended a choppy session mixed on Tuesday, with the S&P 500 ending a five-session losing streak and the Dow shaking off a drop of more than 1% at session lows to turn slightly positive. The Nasdaq fell for the fifth time in six sessions as tech stocks extended their selloff.

A rotation into cyclical and value stocks and away from some of the high growth names that led markets higher last year has picked up steam over the past week. The energy, financials, materials and industrial sectors have outperformed strongly over the last five trading days, while the information technology and consumer discretionary sectors declined.

“This month has actually [been] the largest outperformance of value versus growth in the last 20 years,” Sam Hendel, Levin Easterly Partners, told Yahoo Finance. “We’re sort of seeing a really nice sweet spot for value stocks that we think have been left behind … Growth’s had this huge run, and rates are so low that there aren’t that many places to find yield. So we still think value has a lot of legs.”

At the same time, concerns over inflation and rising Treasury yields have also weighed on stocks across the board this week, with higher prices and increased borrowing costs for companies seen as an emerging threat. The benchmark 10-year Treasury yield rose to 1.43% Wednesday morning, continuing its march higher.

Federal Reserve Chair Jerome Powell, however, tried to assuage market participants’ fears during his semiannual monetary policy testimony before the Senate Banking Committee on Tuesday, calling Treasury yields’ march higher “a statement of confidence on the part of markets that we’ll have a robust and ultimately complete recovery” and reaffirming that he believed any inflation in the coming months will prove transitory.

“I think there was a bit of a scare in markets last week because we were starting to see more of the move coming in real yields, and if that were to go too far then I think it could potentially cause some issues for risk assets,” UBS economist Seth Carpenter told Yahoo Finance. “And I think the real concern is that if it goes so far that it starts to impair the recovery, then it becomes a problem. So far I think we’re in good shape, but it’s something absolutely to watch.”