United Investment Limited - These stocks received a lift from an unexpected source

A broad range of equities surged higher on Wednesday, as Wall Street focused on Treasury rates and foreign government initiatives to calm the financial markets.
 
CENTRAL, Hong Kong - Dec. 5, 2022 - PRLog -- With this as a backdrop, a number of digital economy-focused firms outperformed the broader markets. Shopify Inc. (SHOP) shares soared as much as 5.5%, PayPal Holdings Inc. (PYPL) shares rose as high as 6.9%, and Latin American e-commerce and fintech giant MercadoLibre Inc. (MELI) shares increased as much as 8.3%. When the market closed, stocks were still in the black, up 5%, 6.3% and 7.5% respectively. These companies rose in tandem with the larger markets, with the S&P 500 (^GSPC) and NASDAQ Composite (^IXIC) both gaining nearly 2%.

There was no company-specific news driving these increases but shares had been hammered over the last year, so any good news was a solid reason for fair-weather investors to return to the market. Positive developments in the ongoing tale of the British pound and an increase in the U.S. Dollar. The catalyst was Treasury yields.

A couple of dramatic occurrences in recent days have dragged on the main market indexes, driving the NASDAQ Composite (^IXIC) and the S&P 500 (^GSPC) to fresh bear market lows on Tuesday.

The Bank of England stepped in, announcing intentions to purchase. The U.K. government will issue debt "on whatever scale is necessary" to "establish orderly market conditions." A drop in the British pound earlier this week rallied global financial markets, with the currency falling almost 5% Monday to a new low versus the U.S. dollar, following a 3.6% drop on Friday.

Treasury bond rates in the United States had risen in response to these events, with the benchmark 10-year yield above 4%, the highest level since 2008. The rate has an impact on some interest rates, the most significant being mortgages, which have risen beyond 6% for the first time since 2008. Following the statement by the Bank of England early Wednesday, yields fell from historic highs but mortgage rates rose even higher.

So, what does all of this have to do with the stock market in the United States in general and these technology stocks in particular? When the yield on 10-year U.S. price of Treasuries rises, it makes these bonds more appealing to investors, especially given the macroeconomic uncertainties caused by the protracted bear market. The flight to safety increased as interest-sensitive investors withdrew money from equities to take advantage of increasing bond rates, causing some equity investors to panic.

At United Investment (https://unitedinvest-hk.com), we understand that finding the right advisor can be a difficult task. United Investment's advisors are experts in identifying areas and opportunities that are perfectly aligned with their client's objectives.

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Catherine Chao
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