Technology shares fell on Monday as government bond yields continued to rise, indicating that investors expect the Federal Reserve to move quickly in raising interest rates.
The high-tech Nasdaq Composite was down 2.6%. Last week, the benchmark index posted its biggest one-week percentage drop since February, as rising bond yields breached technical valuations. The S&P 500 fell 1.9% in trading Monday, while the Dow Jones Industrial Average fell 1.6%, or 578 points.
Nvidia chip makerAnd
One of the best performing stocks of 2021, down 5%. Alphabet, Apple and Microsoft, Google’s parent company, rejected more than 2%.
The technology losses came as the yield on the benchmark 10-year Treasury bond – which moves inversely to its price – rose to 1.798% on Monday from 1.769% on Friday. Friday’s closing level was the highest since January 2020, before yields plummeted with the onset of the pandemic.
Rising revenue at the start of 2022 sent tech stocks reeling. By selling bonds and sending higher yields, investors are signaling that they believe the Fed may raise short-term interest rates in March and begin reducing its holdings of bonds and other assets shortly thereafter.
Low rates helped fuel a surge in technology stocks last year, by making them less attractive to investors for holding bonds and encouraging them to buy risky assets. But as the Fed has turned to fighting inflation in recent weeks, tech stocks have lost some of their luster.
US inflation data released on Wednesday will be watched with interest as investors seek to forecast when the Federal Reserve will start raising borrowing costs. Monthly consumer prices are expected to rise more than 7% from the previous year, for the first time since 1982.
Earnings season at major US financial firms begins later this week, with JPMorgan Chase, CitigroupAnd
Wells Fargo and BlackRock are due to file results for the fourth quarter of 2021. Many investors are paying money into bank stocks, believing that they will make a profit from higher interest rates.
Among them is Hani Reda, a multi-asset fund manager at PineBridge Investments. He said the New York-based investment firm reduced its ownership of technology stocks and Treasurys while boosting its cash holdings and exposure to financial firms.
“Stocks are down and bonds are down as well,” Mr. Raza said. “At least for a while, even cash is better than owning risky assets.”
In individual stocks, Take-Two Interactive fell 14% after the video game maker agreed to buy Zynga in an $11 billion deal. Zynga is up more than 40%. Lululemon fell 5.8% after saying that fourth-quarter earnings will fall toward the bottom line of expectations.
A favorite among retail traders, it is down 14%, having jumped last week after the Wall Street Journal reported that it plans to enter the cryptocurrency and non-fungible token markets.
In commodities, US natural gas prices rose 4.1% to $3.88 per million British thermal units. Cold weather in the Midwest and eastern United States early this week is likely to increase fuel demand, according to analysts at NatGas Weather.
Stock markets abroad were mixed. The Stoxx Europe 600 Index fell 1.4%, dragged down by real estate and technology stocks.
In Asia, the Shanghai Composite Index rose 0.4% and the Hang Seng Index in Hong Kong rose 1.1%. Japanese markets were closed for a public holiday.
Mark Andersen, head of asset allocation in the principal investment office at UBS Global Wealth Management, said he favors European, Japanese, energy and financial stocks.
“The Fed clearly wants to tighten financial conditions, and the way to do that is obviously by raising interest rates,” he said.
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