S&P 500 Slips as Tech Bets Pause, Bond Yields Surge on Hawkish Fed Fears
2022.04.05 22:12
By Yasin Ebrahim
Investing.com – The S&P 500 fell Tuesday, under pressure from falling tech stocks after U.S. government bond yields surged as Federal Reserve officials continued to back aggressive monetary policy tightening to rein in above-target inflation.
The S&P 500 fell 0.8%, the Dow Jones Industrial Average fell 0.4%, or 145 points, the Nasdaq slumped 1.8%.
Federal Reserve Governor Lael Brainard, who is awaiting a confirmation vote to take the reins as Fed vice chair, said the Fed is “prepared to take stronger action, if indicators of inflation and inflation expectations indicate that such action is warranted.”
Brainaird also said the Fed could start to “reduce the balance sheet at a rapid pace as soon as our May meeting.”
The hawkish remarks come ahead of the release of the Fed’s meetings from its March meeting expected to reveal more about the central bank’s plan to begin balance sheeting reduction.
Treasury yields jumped sharply, with the 10-year yield rising above 2.5% rising to a nearly three year high to growth sectors of the market including tech.
Big tech, Facebook (NASDAQ:FB) excluded, was in the red. Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOGL), were down more than 1%, while Amazon.com (NASDAQ:AMZN) was down 2%.
Twitter (NYSE:TWTR), however, bucked the trend lower, adding to its gains from a day earlier after the social media company announced that Elon Musk would join its board.
Consumer discretionary stocks also dragged the broader market lower as weakness in Tesla (NASDAQ:TSLA) and casino stocks including PENN and LVS offset gains in cruise stocks.
Norwegian Cruise Line (NYSE:NCLH) was up 1% and Carnival Corporation (NYSE:CCL) rose 2% after the latter reported record one-day bookings, stoking investor optimism about the return of demand for cruises following a pandemic-fueled lull.
Energy stocks were on back foot as oil prices gave up gains even as the European Union detailed plans to impose new sanctions on Russian oil imports.
“If this [an EU embargo on Russia oil] were to happen, demand would switch to an even greater extent to other sources of supply, which would result in considerable price rises,” Commerzbank said in a note.
Devon Energy (NYSE:DVN), Occidental Petroleum (NYSE:OXY) and Marathon Oil (NYSE:MRO) led the sector to the downside.
On the economic front, services activity in March slightly missed forecasts, though economists continue to expect the sector to rebound as the reopening gathers pace.
“Demand for services remains robust, and we expect that this will continue through the Spring and into the Summer at a minimum,” Jefferies said in a note.
