In a sudden turn of events, real estate and utilities sectors took a hit on Wednesday as Treasury yields surged above 4.5%. The 10-year Treasury yield spike caused real estate to plummet by 4.1%, making it the biggest loser among the 11 sectors of the S&P 500. Stocks like SBA Communications, Extra Space Storage, and Boston Properties all saw significant drops of more than 6%.
Similarly, utilities also slumped by 1.7%, with AES Corp, Pinnacle West Capital, and CenterPoint Energy dragging the sector lower with drops of more than 3%. The high interest rate environment has made it tough for these sectors, as higher rates increase borrowing costs for real estate investment trusts and utilities. Additionally, income-seeking investors may be drawn to safer Treasurys rather than the dividends from real estate and utility stocks when rates are high.
On the other hand, regional banks faced a tough day in response to March’s faster inflation and the subsequent repricing of Treasury yields. The S&P 1500 Regional Bank Index, which includes banks from the S&P 500, S&P Midcap 400, and S&P Smallcap 600, saw a significant drop of 4.5%. Examples of the carnage include New York Community Bancorp, Brookline Bancorp, and Western Alliance Bancorp, all experiencing notable declines.
In the biotechnology sector, Vertex Pharmaceuticals announced the acquisition of Alpine Immune Sciences for $4.9 billion in cash, causing Vertex shares to dip by 1% in extended trading. Alpine shares, on the other hand, surged by more than 36% after the announcement. The biopharmaceutical company focuses on developing protein-based immunotherapies for certain autoimmune diseases.
As the day came to a close, U.S. stock futures opened lower on Wednesday evening. Futures linked to the S&P 500 slipped by 0.2%, while Dow futures dropped by 79 points or 0.2%, and Nasdaq 100 futures slid by 0.16%. Investors will be closely monitoring the market in the coming days to see how these sectors recover from the recent downturn.
