Tech Leads Stock Losses as 10-Year Yields Hit 1.8%: Markets Wrap

(Bloomberg) — Technology companies led stock losses in another leg down for pricey growth shares under threat from rising rates and inflation. Treasury 10-year yields climbed to 1.8%.

The Nasdaq 100 underperformed major equity benchmarks, with electric-vehicle giant Tesla Inc. set for its longest losing streak since March 2021. Lululemon Athletica Inc. tumbled after the maker of yoga pants warned that financial results will come at the low end of its previous guidance. Bitcoin fell for the fifth time in six sessions, putting it on pace for its worst start to a year since the earliest days of the digital alternative to money.

Markets face high volatility as investors grapple with how to reprice assets as the pandemic liquidity that helped drive equities to record highs is withdrawn. The Federal Reserve will likely raise rates four times this year and will start its balance sheet runoff process in July, if not earlier, according to Goldman Sachs Group Inc. Fed Chair Jerome Powell is set to be grilled on the sharpest shift toward monetary tightening in decades at a hearing Tuesday.

“There is plenty of hawkishness yet to be priced in the asset prices, and that could cause a bit more selling across the markets this week, especially in growth stocks which should feel the pinch of higher interest rates compared with the value names,” said Ipek Ozkardeskaya, senior analyst at Swissquote.

In the past three decades, there have been four distinct periods of rate-hike cycles by the Fed. On average, technology, which has been under pressure amid prospects of earlier and faster rate increases, is among the best-performing sectors during those cycles, according to Strategas Securities.

Here are some key events this week:

Powell’s confirmation hearing in the Senate Banking Committee on Tuesday.
Kansas City Fed President Esther George and St. Louis Fed President James Bullard discuss the economic and monetary policy outlook on Tuesday.
EIA crude oil inventory report on Wednesday.
China PPI, CPI on Wednesday.
U.S. CPI, Fed Beige Book on Wednesday.
U.S. initial jobless claims, PPI on Thursday.
U.S. Senate Banking Committee hearing for Lael Brainard, nominated as Fed vice-chair on Thursday.
Richmond Fed President Thomas Barkin, Philadelphia Fed President Patrick Harker,
Chicago Fed President Charles Evans speak on Thursday.
Bank of Korea policy decision and briefing on Friday.
Wells Fargo, Citigroup, JPMorgan due to report earnings on Friday.
U.S. business inventories, industrial production, University of Michigan consumer sentiment, retail sales on Friday.
New York Fed President John Williams speaks Friday.

For more market analysis, read our MLIV blog.

Some of the main moves in markets:

Stocks

The S&P 500 fell 0.7% as of 9:31 a.m. New York time
The Nasdaq 100 fell 1.2%
The Dow Jones Industrial Average fell 0.4%
The Stoxx Europe 600 fell 0.8%
The MSCI World index fell 0.6%

Currencies

The Bloomberg Dollar Spot Index rose 0.3%
The euro fell 0.6% to $1.1293
The British pound fell 0.3% to $1.3542
The Japanese yen rose 0.1% to 115.43 per dollar

Bonds

The yield on 10-year Treasuries advanced four basis points to 1.80%
Germany’s 10-year yield advanced two basis points to -0.03%
Britain’s 10-year yield advanced two basis points to 1.20%

Commodities

West Texas Intermediate crude was little changed
Gold futures fell 0.3% to $1,791.40 an ounce

More stories like this are available on bloomberg.com