(Bloomberg) — A stock rally driven by dip buyers fizzled out as tech giants weighed heavily on the market, with traders also assessing economic data against prospects for rate hikes.
The S&P 500 fell after earlier jumping almost 2%, while the tech-heavy Nasdaq 100 underperformed. Electric-car firm Tesla Inc. tumbled more than 8% after cautious comments on supply-chain troubles. Intel Corp. dragged down fellow chipmakers on a disappointing profit forecast. Apple Inc. fluctuated ahead of its earnings report. The dollar traded near session highs, while the two-year Treasury yield — which is more sensitive to near-term policy moves — climbed.
More than $5 trillion has been wiped out from stock values this year as traders struggled to price the outlook for monetary policy. Markets had been factoring in four quarter-point hikes in 2022, but that edged toward five after Federal Reserve Chair Jerome Powell suggested the economy and labor market could handle a faster pace if warranted. U.S. gross domestic product accelerated by more than forecast in the fourth quarter, while jobless claims fell for the first time in four weeks.
Morgan Stanley’s strategist Andrew Sheets is doubling down on a bet that U.S. stocks are turning from leaders to laggards as they struggle to adjust to an era of tighter policy. He ramped up his projection that inflation-adjusted yields will rise from deeply negative levels back to the pre-pandemic norm — threatening fresh pain for rate-sensitive growth shares that drive America’s megacap indexes.
“When you look at the market, investors are still trying to digest the Fed’s path forward, so some ups and downs are likely to persist,” said Mike Loewengart, managing director of investment strategy at E*Trade from Morgan Stanley.
Other corporate highlights:
- Netflix Inc. soared as hedge fund magnate Bill Ackman acquired more than 3.1 million shares in a vote of confidence following a recent collapse in the streaming giant’s stock price.
- Comcast Corp. plans to double spending on content for its Peacock streaming service this year in an attempt to attract more paying subscribers. Shares rose.
- T. Rowe Price Group Inc. tumbled after the firm said client redemptions may continue with the Fed poised to raise rates.
What to watch this week:
- Euro zone economic confidence, consumer confidence Friday.
- U.S. consumer income, University of Michigan consumer sentiment Friday.
For more market analysis, read our MLIV blog.
Some of the main moves in markets:
Stocks
- The S&P 500 fell 0.4% as of 1:13 p.m. New York time
- The Nasdaq 100 fell 0.7%
- The Dow Jones Industrial Average was little changed
- The MSCI World index fell 0.9%
Currencies
- The Bloomberg Dollar Spot Index rose 0.7%
- The euro fell 0.9% to $1.1138
- The British pound fell 0.7% to $1.3371
- The Japanese yen fell 0.6% to 115.32 per dollar
Bonds
- The yield on 10-year Treasuries declined seven basis points to 1.79%
- Germany’s 10-year yield advanced two basis points to -0.06%
- Britain’s 10-year yield advanced three basis points to 1.23%
Commodities
- West Texas Intermediate crude fell 0.5% to $86.94 a barrel
- Gold futures fell 2% to $1,794.70 an ounce
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
