Market Turmoil: Tech Stocks Take a Hit as Interest Rate Hopes Fade
The US stock market is bracing for another tumultuous session, with tech stocks leading the decline in futures trading on Monday. The S&P 500 futures plummeted 0.8%, while the Nasdaq 100 futures tumbled 1.2%, indicating a rough start to the week.
Fading Hopes for Interest Rate Cuts
The recent hot jobs report has sparked concerns that the Federal Reserve may keep interest rates higher for longer, dashing hopes for a rate cut anytime soon. As a result, traders are now betting that the Fed won’t cut rates until at least September, with only a 30-basis-point reduction expected in 2025.
Dollar and Bond Yields Soar
The dollar surged to a two-year high against major currencies, with the UK pound coming under particular pressure. Meanwhile, the 10-year Treasury yield touched a 14-month high, trading close to 4.8%, and the 30-year yield neared 5% as US bonds sold off.
Consumer Price Index Takes Center Stage
With inflation concerns running high, all eyes are on the upcoming Consumer Price Index reading for December, due on Wednesday. Markets are anxious to see if inflation will cool to the central bank’s 2% target, and the report’s outcome could have significant implications for interest rates and the overall economy.
Oil Prices Rise on Sanctions
Oil prices rose around 2% to their highest levels in five months, driven by the US imposing tougher sanctions on Russia’s crude industry than expected. This has raised concerns about supply to China and India, adding to the market’s woes.
Tech Megacaps Take a Hit
Shares of Nvidia and Tesla slid, with all the “Magnificent Seven” tech megacaps losing ground in the market turmoil. Europe’s largest pension fund revealed that it sold its entire stake in Tesla over CEO Elon Musk’s pay package.
Investors on Edge
Investors are on high alert, with the rise in yields and energy prices creating a perfect storm for the bulls. The Goldman Sachs team noted that the move in rates is tightening financial conditions, which may weigh on growth and risk assets. As a result, positions that benefit from lower US yields are looking more attractive, especially for portfolios that already embrace the US growth theme.
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