What occurred 

Shares of Lumen Applied sciences (LUMN -5.76%), a cloud connectivity and safety options firm, had been falling right now, simply someday after the corporate misplaced its spot on the S&P 500 index and after Federal Reserve Chairman Jerome Powell stated there’s nonetheless a have to proceed elevating rates of interest. 

The tech inventory is down by 5.6% as of 11:40 a.m. ET.  

So what 

Yesterday, the S&P Dow Jones Indexes introduced that it is changing Lumen within the S&P 500 with the credit score rating firm Truthful Isaac, efficient March 20. The transfer is a part of the index’s quarterly rebalancing. With Lumen’s valuation plummeting as the corporate’s shares have fallen 70% over the previous yr, the inventory will now be a part of the S&P SmallCap 600. 

Buyers usually do not wish to see an organization shedding its spot on the S&P 500, however traders, oddly, reacted positively to the information yesterday. They rapidly reversed that sentiment right now as they processed the information. 

Moreover, Lumen traders could also be reacting to Federal Reserve Chairman Jerome Powell’s feedback right now through which he stated that the central financial institution could proceed to boost rates of interest.

“The most recent financial knowledge have are available in stronger than anticipated, which means that the final word stage of rates of interest is more likely to be larger than beforehand anticipated,” Powell stated right now.  

He added that if the information continues to indicate that sooner charge hikes are wanted, the tempo of charge hikes will improve. 

That is positively not what know-how traders wish to hear proper now. Rising rates of interest have raised borrowing prices for corporations and induced many corporations to fret about an financial slowdown if charges proceed to climb. 

Now what

Lumen traders could not have a lot to look ahead to proper now, as the corporate lately issued full-year steering saying that adjusted earnings earlier than curiosity, tax, depreciation, and amortization (EBITDA) are anticipated to fall about 30% subsequent yr to $4.7 billion, on the midpoint of steering. 

With the corporate’s adjusted earnings anticipated to fall, Lumen shedding its spot on the S&P 500, and traders anxious about rising rates of interest, it is no shock to see the corporate’s shares falling right now.