Dow Sheds 1,000 Points as U.S. Bond Yield Spike Triggers Tech Fire Sale
2022.05.05 20:42
By Yasin Ebrahim
Investing.com – The Dow slumped Thursday, following a rout in technology stocks as Treasury yields climbed to multi-year highs a day after the Federal Reserve delivered its biggest interest rate hike in more than two decades.
The Dow Jones Industrial Average slipped 3%, or 1,004 points, the Nasdaq fell 4.7%.
Big tech was led lower by a more than 5% slump in Amazon (NASDAQ:AMZN) and Facebook (NASDAQ:FB), with Alphabet (NASDAQ:GOOGL), Apple (NASDAQ:AAPL), and Microsoft (NASDAQ:MSFT) not far behind as rising Treasury yields, the enemy of growth stocks like tech, jumped.
The 10-year Treasury yield briefly jumped to 3.1%, its highest level since November 2018, a day after the Fed delivered a 50 basis points increase. The clear breakout above 3% will likely lead to a further climb in rates, which remain low compared to the long-term average.
“The next objective for the 10-year Treasury yield would be about 3.25%. I think that’s the next reasonable point where where you could see yields reset a little bit and see things sort of normalized,” Chief Market Strategist David Keller at StockCharts.com told Investing.com in an interview earlier this week.
Fed Chairman Jerome Powell on Wednesday downplayed the prospect of a larger 75 basis points rate hike, but said further 50 basis points rate hikes were in consideration in the coming months, keeping investor bets on the year-end Fed funds rates intact.
“[W]e now see a third 50bp rate hike as likely at the July FOMC [and] 25bp for the balance of the year, bringing the fed funds rate at the end of 2022 to 2.625%,” Morgan Stanely said in a note.
