Nasdaq dips into correction territory after painful start to 2022

The tech-heavy Nasdaq Composite fell into correction territory on Monday, down more than 10 percent from a record high set in November, as the sell-off in high-flying stocks accelerated.

The index, which includes tech giants such as Apple and Google owner Alphabet, fell 2.2% on Monday after falling 4.5% last week. Analysts typically see a 10% drop from recent highs as a sign of a “correction” in the market.

The declines in tech stocks were more severe than those in the broader U.S. and European stock markets. Soaring U.S. Treasury yields fueled the sell-off, as investors dumped government debt on expectations the Federal Reserve will tighten policy. The benchmark S&P 500 fell 1.6%, while the Stoxx Europe 600 fell 1.1%.

Fed Yes Consider this year’s rate hike cycle as the reopening of the economy and stimulus spending have pushed inflation to multi-decade highs and helped the labor market recover from the shock of the coronavirus pandemic.

The change in sentiment has hit the stocks of technology companies that have benefited from the embarrassing blockade of other industries and are boosted by low interest rates Help investors prove This high Valuations of a small group of large companies thriving during the pandemic.

“As you get more returns out of cash or bonds, you’re less willing to take the risk of volatile, expensive tech stocks,” said Trevor Greetham, head of multi-asset at Royal London Asset Management.

Economists polled by Reuters expect data on Wednesday to show U.S. consumer prices rose at an annual rate of 7 percent last month, up from 6.8 percent in November.

U.S. unemployment rate falls to unexpectedly low 3.9% in December, the Labor Department’s nonfarm payrolls report last week showed.this is in a few days minute The Fed’s latest meeting showed central bankers have discussed raising rates “more or less quickly” than previously expected.

Goldman Sachs strategists expect the Fed to raise interest rates four times this year after capping interest rates near zero in March 2020, a move that has lowered funding costs for companies and boosted global stocks.

“We continue to see rate hikes in March, June and September, and have now hiked rates in December for a total of four hikes through 2022,” Goldman’s Jan Hatzius said in a note to clients.

“The decline in labor market slack has made Fed officials more sensitive to upside inflation risks and less sensitive to downside growth risks.”

The 10-year U.S. Treasury yield rose as much as 0.04 percentage point to 1.808%, its highest level since January 2020, as debt prices fell to reflect an expected rise in interest rates, making fixed-income securities less attractive.

Yields on debt, which underpins global corporate borrowing costs, have climbed from about 1.53% at the start of the year as traders also evaluate The economic threat of the Omicron coronavirus variant has receded.

The U.S. dollar index, which measures the greenback against six other currencies, was up 0.5%.

Meanwhile, among cryptocurrencies, the price of bitcoin fell below $40,000 on Monday for the first time since September 2021.

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