© Reuters. FILE PHOTO: Raindrops hang on a Wall Street sign outside the New York Stock Exchange in Manhattan, New York City, U.S., October 26, 2020.REUTERS/Mike Seger/File Photo
(Reuters) – Wall Street’s main indexes tumbled on Monday, led by the Nasdaq, as technology shares fell as expectations of a faster-than-expected rate hike pushed U.S. Treasury yields to a fresh two-year high.
While the Nasdaq pared losses in afternoon trade, it was down 10.37% from an earlier intraday record on Nov. 22. It last traded nearly 8% below its Nov. 19 closing record. If the close is 10% or more below the record close, it will confirm a correction.
Consumer discretionary, technology and communications services sectors, including high-profile growth companies, all fell sharply.
In addition to focusing on rising bond yields, investors are anxiously awaiting this week’s inflation data and what that means for the Fed to tighten monetary policy, said Peter Tooze, president of Chase Investment Advisors in Charlottesville, Va. The analyst is also concerned about the impact of the latest coronavirus case count on the fourth-quarter earnings season, which begins later this week.
“There are still concerns about what’s going on with inflation and how the Fed is going to act to ease that,” Tooze said. “Technology, especially companies with low or no profits and/or high multiples, can be hurt when interest rates rise sharply, as future earnings and their value today become more questionable.”
Randy Frederick, Managing Director of Trading and Derivatives Charles Schwab Austin, Texas (NYSE: ) said big tech companies should be doing well, but he thinks they’re “dragged down by the fact that people are selling off unprofitable, highly leveraged, heavily indebted emerging tech companies that recently went public. , especially those that are SPACs (special purpose acquisition companies).”
The tech selloff is likely to continue until the next Fed meeting later this month, Frederick said.
By 2:07 p.m. ET, the S&P 500 was down 255.44 points, or 0.71%, to 35,976.22, and the S&P 500 was down 32.01 points, or 0.68%, to 4,645.02, and 129.52 points, or 0.87%, to 14,806.38.
Of the S&P’s 11 major sectors, only health care edged up 0.3%, while consumer discretionary was the biggest percentage loser, down 1.6%.
The S&P 500 and Nasdaq fell for five straight days as growth stocks tumbled after investors began to rebalance their portfolios in response to a more hawkish Federal Reserve.
Goldman Sachs (NYSE: ) said it expects the Fed to raise interest rates four times in 2022, compared with a previous forecast of three.
Traders have raised their rate-hike expectations since minutes from the Fed’s December meeting appeared to suggest an earlier-than-expected rate hike.
The benchmark rose to its highest level in nearly two years on Monday, pushing the value-oriented bank index to an all-time high.
Nasdaq-heavy Tesla (NASDAQ: NASDAQ: NASDAQ ) fell earlier in the session, but the stock regained lost ground in afternoon trading. Chief Executive Elon Musk may have rattled some investors after tweeting on Friday that the electric car maker will raise the price of its advanced driver assistance software in the U.S.
Microsoft (Nasdaq: ) fell 1.2% after media reports that the software company had lost its augmented reality talent to peers such as Meta Platforms.
Investors await this week’s inflation data for clues on consumer and producer prices and whether they will affect the trajectory of the Fed’s rate hikes.
nike (NYSE: HSBC) fell nearly 5% after HSBC downgraded the stock to “hold.”
Declining issues outnumbered advancing ones on the NYSE by a 3.02-to-1 ratio; on Nasdaq, a 3.23-to-1 ratio favored decliners.
The S&P 500 posted 37 new 52-week highs and 5 new lows; the Nasdaq Composite posted 59 new highs and 592 new lows.