Nasdaq falls more than 1%, enters the correction area

U.S. stocks gave up early gains and fell, prolonging a recent stretch of losses that has dragged large indices down to start the year.

The technology-heavy Nasdaq Composite fell 166.64 points, or 1.1%, to 14,340.26. It ended the day 10.7% below the record-breaking highest level ever, set in November. A fall of more than 10% is considered a correction for a stock index.

The S&P 500 fell 44.35 points, or 1%, to 4,532.76. The Dow Jones Industrial Average lost 339.82 points, or 1%, to 35028.65.

Wednesday’s trading activity continued a tumultuous stretch for the major indices, with stocks parrying their previous gains and closing close to session lows. In the first weeks of January, many investors have started dumping stocks in technology companies and piling into other corners of the market in anticipation of rising interest rates. Some investors are positioning themselves for the Covid-19 pandemic to become an endemic one.

Investors have stepped up bets that the Federal Reserve and other major central banks will tighten monetary policy In the coming months, draw a pillar of support to markets. Rising expectations of interest rate hikes follow evidence that the driving forces behind inflation have expanded beyond the supply chain shock that led to price hikes for most of 2021.

This has led to large fluctuations, leaving many shares in a bear market and start-up of giant rotations between different sectors.

The latest volatility is “It’s really about inflation, and how aggressive central banks will be to counter it,” said Brian O’Reilly, head of market strategy at Mediolanum Asset Management, adding that inflation can also curb economic growth by slashing consumption. . “The market is definitely nervous at the moment,” he said.

Government bond prices rose on Wednesday, pushing interest rates down. Yields on benchmark 10-year government bonds fell to 1.826% from 1.866% on Tuesday, which was their highest level since January 2020. Yields on yield-sensitive two-year bonds were down to 1.022% from 1.038% on Tuesday.

The movements in the bond market have rippled through equities and especially the technology sector. The Nasdaq Composite has fallen 8% this year, a much stronger fall than S&P or Dow Industrials.

“There is currently a knee-jerk reaction in the market” in response to rising bond yields, said Dev Kantesaria, founder of Valley Forge Capital.

And there are signs that individual investors – a key force behind 2021’s stock market rally – are cooling on technology, according to analysts at Vanda Research. Retail investors have bought shares in finance and energy companies while their purchases of high-flying stocks are suffering

Advanced micro-devices

and

Nvidia

has been dwindling, Vanda said.

To keep Covid-19 out, China closed some border gates late last year, leaving products to rot in trucks. Restrictions like these and regulations in some Chinese ports, the gates of goods on their way to the world, can fall into delays in the global supply chain. Photo composed: Emily Siu

Other corners of the market have staged a strong rally. The S&P 500’s value index has surpassed its growth index by about 7.4 percentage points this month, in line with the largest monthly outperformance since December 2000, according to Dow Jones Market Data.

Some of the largest lenders in the United States reported rising earnings.

Bank of america

Shares rose 18 cents, or 0.4%, to $ 46.44, after the lender reported one jump in fourth-quarter profits. Morgan Stanley‘s shares rose $ 1.72, or 1.8%, to $ 95.73, after profits that topped the forecasts.

US Bancorp fell almost 8% after the banking holding company had an increase in compensation costs. This earnings season,

Goldman Sachs,

JPMorgan Chase

and

Citigroup

has also reviewed postpones more in compensation.

Investors have stepped up their efforts to ensure that large central banks tighten monetary policy.


Photo:

Wang Ying / Zuma Press

Procter & Gamble

said consumers were not deterred by higher prices, leads to higher turnover and raises the shares of the consumer goods company around 3.4%.

Over the next week, investors will analyze earnings from major technology companies, including Netflix and Microsoft. Dan Morgan, a portfolio manager at Synovus Trust Co., said he will follow the results closely to see what guidance managers provide for future quarters.

“I hope they do not come out and guide lower,” said Mr. Morgan.

Elsewhere, Europe’s most monitored government bond yield became positive for the first time since 2019. return on 10-year German bottom rose as high as 0.021% on Wednesday after trading in negative territory for over 30 months.

Oil prices rose. Futures on Brent crude rose 1.1% to $ 88.44, reaching their highest level since October 2014. Wednesday’s action prolongs a recovery, driven in part by the potential for supply disruptions in Russia and the Middle East.

Overseas stock markets were mixed after Tuesday’s sale on Wall Street. Stoxx Europe 600 rose 0.2 pct. Asian stocks came under pressure, and Japan’s Nikkei 225 fell 2.8 percent. China’s Shanghai Composite Index fell 0.3 percent.

Write to Gunjan Banerji at gunjan.banerji@wsj.com and Joe Wallace at joe.wallace@wsj.com

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