Stocks sank Monday, with renewed pressure on technology stocks as investors anticipated a hike in interest rates this year and looked ahead to several economic data and earnings reports later this week.
The S&P 500 fell more than 2% at session lows to add to losses after the leading index closed the first week of trading for the new year in the red. The Nasdaq Composite Index is down after its worst week since February 2021. The Dow Jones is also down. Other risky assets have also come under pressure, with bitcoin prices dropping below $40,000 for the first time in nearly four months.
Treasury yields soared, and the benchmark 10-year yield surpassed 1.8% to reach its highest level since January 2020.
“The rally in pricing rates since early December has crushed the valuation of high-growth stocks and low-margins, but the well-ordered advance of Russell 3000 shares implies further repricing,” David Kostin, chief equity strategist at Goldman Sachs, wrote in a note.
“We’ve shown previously that the speed of price movements is important to stock returns,” Kostin added. “Stocks typically struggle when the 5-day or 1-month change in nominal or real rates is greater than 2 standard deviations. The recent return volume qualifies as a 2+ standard deviation event in either case.”
The rise in yields and volatility across US stocks came after the release of the minutes of the Federal Reserve’s December meeting in the middle of last week. These findings indicate that some central bank officials were looking to start a faster rate hike and balance sheet return process than many market participants had expected. Economists at Goldman Sachs now predict that the Fed will raise interest rates four times this year – or once more than the company previously expected – and that the central bank’s balance sheet cut will begin in July or sooner.
“Price action in the last week in 10 years has been about what the Fed will do with its balance sheet,” Nicholas Colas, co-founder of DataTrek Research, wrote in a note. “We’ll know more on Tuesday, with [Federal Reserve Chair Jerome Powell’s] Set the re-nomination session at 10 AM. One thing we are sure of: the volatility of the stock market is not over yet. ”
“His confirmation hearing will be an opportunity for him to further reassure lawmakers and the public that the Fed is focused on lowering inflation in 2022,” Colas added. “We expect this to fuel more market volatility this week.”
In addition to Powell’s confirmation hearing before the Senate Banking Committee on Tuesday, investors will also be looking forward to Wednesday’s new inflation report. The Bureau of Labor Statistics will release its December Consumer Price Index (CPI) that day, which is expected to show a 7.0% year-over-year jump in prices – or the biggest rise since 1982. At the end of the week, major banks including JPMorgan Chase (JPM), Citigroup (C) and Wells Fargo (WFC) report Friday morning before the opening bell.
12:17PM ET: Tesla shares head into longest losing streak in 10 months amid tech defeat
Tesla (TSLA) stock was on track to post losses for the fifth consecutive session, as shares of the world’s most valuable automaker by market value came under pressure amid a broader sell-off of high-value shares.
The fifth day of losses will mark Tesla’s longest losing streak since March of last year. Shares are down more than 15% since the market closed Jan. 3 in daily trading on Monday.
The drop also came despite a bullish call from Goldman Sachs, which raised the 12-month price target for the stock to $1,200 from $1,125 previously and maintained a buy recommendation on the stock.
10:41 a.m. ET: US wholesale inventories adjusted higher in November as re-inventories recovered
U.S. wholesale inventories were revised higher than expected for November, indicating increased restocking activity and helping relieve some of the ongoing supply chain pressures across the economy.
Wholesale inventories rose 1.4% in the Commerce Department’s last monthly reading for November, topping the 1.2% rise previously reported. This came after inventories increased 2.5% in October.
10:15AM ET: Bitcoin slips below $40,000 for the first time in four months
Bitcoin prices fell on Monday as the cryptocurrency continued to slide after a volatile start to the year.
The largest cryptocurrency by market capitalization saw prices drop more than 5% to less than $40,000 at session lows Monday morning in New York, based on Yahoo Finance data. This was the first time that prices had broken below this limit since September. Prices settled just under $41,000 as of 10:15 AM ET.
Other cryptocurrencies have also seen price drops. Ethereum, the second largest cryptocurrency by market capitalization, fell more than 3% to fall below $3,000.
9:30 a.m. ET: Stocks open lower
Here’s where the markets traded after the opening bell on Monday morning:
Standard & Poor’s 500 (^ Salafist Group for Preaching and Combat): -32.62 (-0.7%) to 4,644.41
dow (^ DJI): -114.81 (-0.32%) to 36116.85
Nasdaq (^ ninth): -189.4 (-1.2%) to 14765.79
raw (CL = F.):- $0.36 (-0.45%) to $79.10 per barrel
gold (GC = F.): + $4.90 (+0.27%) to $1,794.10 per ounce
Treasury for 10 years (^ degeneration): +2.7 basis points to produce 1.803%
8:30 a.m. ET: Lululemon shares fall after the company says it’s seeing sales, earnings from Omicron weighed
Shares of sportswear manufacturer Lululemon (LULU) sank Monday morning after the company said it expects to see fourth-quarter revenue and earnings due to impacts from shifting situations from Omicron.
“We started the holiday season on a strong note, but have since experienced several consequences of the Omicron variant, including increased capacity constraints, limited staff availability, and reduced hours,” Lululemon CEO Calvin MacDonald said in a press release Monday. work in certain locations.
The company expects fourth-quarter net revenue “to be toward the lower end of its range of $2.125 billion to $2.165 billion, and expects diluted earnings per share and adjusted diluted earnings per share to be toward the lower end of its ranges of $3.24 to $3.31 and $3.25 to $3.32, respectively.”
Shares are down about 7% in early trading. Shares are down more than 9% from 2022 through Friday’s closing date.
7:40AM ET Monday: Stock futures head to a mixed open
Here is where the markets were trading before the opening bell Monday morning:
S&P 500 futures contractsES = F.): -13.5 points (-0.29%) to 4,654.25 points
Dow futures contractsYM = F.): -41 points (-0.11%) to 36,066.00
Nasdaq futures contractsNQ = F.): -97.5 points (-0.63%) to 15,483.50 points
raw (CL = F.):- $0.53 (-0.67%) to $78.37 per barrel
gold (GC = F.): + $1.30 (+0.07%) to $1,798.70 per ounce
Treasury for 10 years (^ degeneration): unchanged, yield 1.769%
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter
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