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Tech crash, banks lead Wall St to new 2022 low

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Stocks fell to a new low for the year on Wall Street on Tuesday and bond yields jumped amid renewed concerns the Federal Reserve will raise interest rates to combat rising inflation. The S&P 500 fell 1.8%, the Dow Jones Industrial Average lost 1.5% and the Nasdaq fell 2.6%. Tech stocks and banks led the decline. Goldman Sachs fell after the investment bank reported a sharp decline in earnings. Crude oil prices rose amid supply issues following an attack on an oil facility in the UAE capital. Activision Blizzard soared on news of a successful takeover by Microsoft.

THIS IS A BREAKING NEWS UPDATE. AP’s earlier history appears below.


Stocks are on track to hit a new low for the year as bond yields jumped on Wall Street on Tuesday amid renewed concerns that the Federal Reserve will raise interest rates to combat rising inflation.

The S&P 500 was down 1.7% at 2:27 p.m. Eastern Time, with about 90% of stocks in the benchmark index in the red. The Dow Jones Industrial Average fell 503 points, or 1.4%, to 35,416, while the Nasdaq slipped 2.2%. Losses in major indices have increased this month as rising inflation and the latest wave of virus pandemics urge investors to be cautious.

Heightened expectations of a rate hike from the Fed kept Treasury yields higher. The 10-year Treasury hit 1.86% on Tuesday, the highest since January 2020. It was at 1.77% on Friday evening.

The Fed has accelerated its plan to reduce bond purchases and plans to raise interest rates sooner and more often than Wall Street expected as it works to reduce inflation, which has surged last month at its fastest pace in nearly 40 years. Meanwhile, the labor market rebounded from last year’s brief but intense coronavirus recession, leaving the unemployment rate at a pandemic low of 3.9% last month, giving the central bank more than leeway to curb the unprecedented support it has provided to the economy since the pandemic hit.

Investors are now pricing in a greater than 93% chance that the Fed will raise short-term rates in March. A month ago, they saw less than a 47% chance of that happening, according to CME Group.

While higher rates could help stem the high inflation sweeping the world, they would also signal an end to the conditions that have put financial markets in easy mode for many investors since the start of 2020.

Higher rates also make stocks of high-flying tech companies and other expensive growth stocks less attractive. Big tech stocks, which have an outsized influence on the S&P 500 due to their lofty valuations, have weighed heavily on the market this year as investors shifted cash in anticipation of rising rates.

The sector was the biggest drag on the S&P on Tuesday. Apple fell 1.7% and chipmaker Nvidia fell 3.6%.

Banks also weighed heavily on the market after Goldman Sachs said its fourth-quarter profit fell 13% from a year earlier, largely due to the high salaries Goldman pays to staff. Goldman’s results echoed those of JPMorgan and Wells Fargo last week, which also reported lower profits and higher expenses due to higher employee compensation costs.

Goldman shares fell 7.3%, while JPMorgan fell 4.5%. Wells Fargo was down 2%.

Small company stocks also lost ground, driving the Russell 2000 Index down 2.3%.

Energy futures rose significantly amid supply fears following an attack on an oil facility in the UAE capital. The price of US crude oil rose 1.5% to around $85 a barrel, a 7-year high. The rise in oil prices gave some energy stocks a boost. Exxon Mobil rose 1.2%.

Investors returning after U.S. markets closed Monday for the Martin Luther King Jr. Day holiday also reviewed the latest batch of corporate earnings and trading news on Tuesday.

Activision Blizzard jumped 26.4% on news of a blockbuster deal. Microsoft, which fell 2%, is buying the maker of games like Call of Duty and Candy Crush for $68.7 billion.

Investors have a busy week of earnings reports ahead. The focus will be on how companies in different industries are dealing with persistent supply chain issues. Many companies have already warned of the impact on their finances and operations, despite rising consumer goods prices to offset the impact.

Bank of America, UnitedHealth and United Airlines report their results on Wednesday. American Airlines, Union Pacific and Netflix release their results on Thursday.

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2/ https://www.thetelegraph.com/news/article/Asia-shares-mostly-lower-as-investors-mull-likely-16783867.php

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