Mid-day: Higher rates become the negative driver for the market

The S&P 500 was up 1.0% earlier today as oil prices briefly dropped below $100.00 per barrel, but investors have sold into the early strength, particularly in the growth stocks amid a sustained spike in Treasury yields. The benchmark index is down 0.4%.

The Nasdaq Composite is down 1.4%, representing the underperformance of the large growth stocks, while the Dow Jones Industrial Average trades higher by 0.4%.

The primary driver for oil, which is currently down 6.8% to $101.85/bbl, is the reported progress in Russia-Ukraine talks. The primary driver for rates is China locking down Shenzhen, a major technology hub, due to a COVID-19 outbreak. That has raised expectations for worsened inflation pressures as a result of increased supply disruptions.

Presently, the 2-yr yield is up seven basis points to 1.82%, and the 10-yr yield is up 12 basis points to 2.12%. The higher rates have bolstered the S&P 500 financials sector (+1.8%), which is joined by the health care sector (+1.1%) with a gain over 1.0%.

It’s a down market, though. Declining issues have better than a 2-to-1 advantage over advancing issues at the NYSE and Nasdaq. The S&P 500 energy (-2.7%), consumer discretionary (-1.6%), communication services (-1.4%), and information technology (-1.4%) sectors are underperforming.

Apple ( AAPL 151.70, -3.04, -2.0%) is an individual drag after Foxconn reportedly halted production at an iPhone factory because of the lockdown, but CNBC reported that the company is doing its best to minimize disruptions due to its diversified production sites in China. AAPL has crossed below its 200-day moving average (153.74).

Even though oil prices are down over 20% from last week’s high, Uber ( UBER 29.63, -1.13, -3.7%) has stoked concerns about an inflation-driven slowdown in consumer spending after announcing a fuel surcharge for customers.

As an aside, the S&P 500 is trading below the psychological 4200 level, which presumably raises the prospect of algorithmic-induced losses if buyers can’t defend the level.

Investors did not receive any economic data today.