Technology stocks tumbled on Monday as government bond yields continued to rise, signaling that investors expect the Federal Reserve to move quickly in raising interest rates.
The tech-heavy Nasdaq Composite Index slid 2.6%. The benchmark last week posted its biggest one-week percentage decline since February, as rising bond yields punctured tech valuations. The S&P 500 was down 1.9% in Monday trading, while the Dow Jones Industrial Average fell 1.6%, or 578 points.
Chip maker
Nvidia,
one of 2021’s best-performing stocks, slumped 5%. Google parent Alphabet,
Apple
and
Microsoft
all declined more than 2%.
The tech losses came as the yield on benchmark 10-year Treasury notes—which moves inversely to their price—rose to 1.798% Monday from 1.769% Friday. Friday’s closing level was the highest since January 2020, before yields tumbled at the start of the pandemic.
Rising yields at the start of 2022 have sent a shudder through tech stocks. By selling bonds and sending yields higher, investors are indicating that they believe the Fed could raise short-term interest rates in March and begin to shrink its holdings of bonds and other assets soon afterward.
Low rates helped fuel a huge rally in tech stocks last year, by making it less attractive for investors to hold bonds and encouraging them to buy risky assets. But as the Fed has pivoted to fighting inflation in recent weeks, tech stocks have lost some of their luster.
U.S. inflation data due Wednesday will be keenly watched as investors seek to predict when the Fed will begin to raise borrowing costs. Monthly consumer prices are expected to have risen more than 7% from a year earlier, for the first time since 1982.
Traders at the New York Stock Exchange on Friday.
Photo:
Spencer Platt/Getty Images
Earnings season kicks off at major U.S. financial firms later this week, with JPMorgan Chase,
Citigroup,
Wells Fargo and
BlackRock
due to file results for the final quarter of 2021. Many investors have been pushing money into bank stocks, figuring they stand to profit from a rise in interest rates.
Among them is
Hani Redha,
a multiasset fund manager at PineBridge Investments. He said the New York-based investment firm has cut its ownership of tech stocks and Treasurys while boosting cash holdings and exposure to financial companies.
“Equities are down and bonds are down too,” Mr. Redha said. “At least for a while, even cash is better than owning risk assets.”
In individual stocks,
Take-Two Interactive
fell 14% after the videogame maker agreed to buy
Zynga
in an $11-billion deal. Zynga rose more than 40%.
Lululemon
declined 5.8% after saying fourth-quarter earnings would fall toward the low end of forecasts.
GameStop,
a favorite among individual traders, lost 14%, having jumped last week after The Wall Street Journal reported that it planned to enter the nonfungible tokens and cryptocurrency markets.
In commodities, U.S. natural-gas prices rose 4.1% to $3.88 per million British thermal units. Cold weather in the Midwest and eastern U.S. early this week will likely boost demand for the fuel, according to analysts at NatGas Weather.
Overseas stock markets were mixed. The Stoxx Europe 600 fell 1.4%, weighed down by shares of real estate and tech companies.
In Asia, the Shanghai Composite Index added 0.4% and Hong Kong’s Hang Seng rose 1.1%. Japanese markets were closed for a public holiday.
Mark Andersen, head of asset allocation at UBS Global Wealth Management’s Chief Investment Office, said he favors European and Japanese stocks and shares of energy and financial companies.
“It’s clear the Fed wants to tighten financial conditions and the means to do that is obviously to get interest rates higher,” he said.
Write to Joe Wallace at joe.wallace@wsj.com
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