Technology, bank stocks drag Wall St to new low for 2022

Technology companies led a broad sell-off on Wall Street Tuesday as bond yields surged amid renewed jitters that the Federal Reserve will act more aggressively than expected to tackle rising inflation.

The S&P 500 fell 1.8%, with about 90% of the stocks in the benchmark index closing in the red. The Nasdaq, which is heavily weighted with technology stocks, slid 2.6%. The Dow Jones Industrial Average fell 1.5%.

The major indexes’ losses have mounted this month as rising inflation and the virus pandemic’s latest surge cause investors to take caution.

Heightened expectations of a rate hike from the Fed have kept Treasury yields rising. The 10-year Treasury hit 1.87% Tuesday, the highest since January 2020. It was at 1.77% late Friday.

Investors are now pricing in a better than 86% probability that the Fed will raise shortterm rates at its meeting of policymakers in March. A month ago, they saw less than a 47% chance of that, according to CME Group.

The S&P 500 fell 85.74 points to 4,577.11, the Dow fell 543.34 points to 35,368.47, and the Nasdaq fell 386.86 points to 14,506.90. The indexes all hit a new low for the year. The Nasdaq has borne the brunt of the losses, shedding 7.3% this month. That puts the index within 2.7% of a correction, Wall Street-speak for when a stock or index falls 10% or more from its last peak. The S&P 500 is down almost 4% for the month after setting an all-time high on the first trading day of the year.

The latest wave of selling comes as Wall Street tries to predict how much the Fed will raise interest rates, and how fast. The central bank has hastened its plan to trim bond purchases and is considering raising interest rates earlier and more often than Wall Street had expected.

The Fed is under pressure to curtail inflation, which jumped last month at its fastest pace in nearly 40 years. At the same time, the job market has bounced back from last year’s brief but intense coronavirus recession, leaving the unemployment rate last month at a pandemic low 3.9%, giving the central bank more leeway to rein in the unprecedented support it’s been providing the economy since the pandemic struck.

Higher rates also make shares in high-flying tech companies and other expensive growth stocks less attractive. Big technology stocks, which have an outsized influence on the S&P 500 because of their high valuations, have weighed heavily on the market this year as investors shift money in anticipation of the higher rates.

Banks also weighed heavily on the market after Goldman Sachs said its fourth-quarter profit fell by 13% from a year earlier, largely due to the hefty pay packages Goldman is paying staff.