Stocks fell again Tuesday as technology stocks continued to decline amid higher interest rates and a rotation in stocks more linked to the economic comeback.
Of the three main indices, the Nasdaq Composite suffered the worst losses, losing 2%. The S&P 500 fell 0.75% while the Dow Jones Industrial Average lost 90 points.
The movement of the futures occurs after a Monday session, which is characterized by large differences in the performance of the market sectors. The tech-heavy Nasdaq Composite was down 2.5% while the Dow was up a modest 27 points. Travel stocks, including airlines and cruise lines, rose sharply across the board, but Apple and Tesla fell.
The broader market closed lower on Monday as the S&P 500 fell 0.7% for the fifth straight year. The decline was due to US Treasury bond yields climbing again, driven by a fall in bond prices.
Tesla was down another 6% on the Tuesday before trading, after falling 9% on Monday. Apple lost 2% in early trading after falling 3% on Monday. The iPhone maker’s stock was down 9.4% last month through Monday’s close.
The yield on 10-year government bonds rose to around 1.37% on Tuesday. So far this month the key rate has risen by an impressive 28 basis points. The 30-year yield hit a year-high of 2.2% on Monday. One basis point is 0.01%.
“The higher government bond yields rise, the faster investors are moving from soaring technology stocks to stocks in the Russell 2000 Index and the Dow Jones Industrial Average,” said Edward Moya, senior market analyst at OANDA, in a note.
The bond market is likely to remain a key topic of discussion on Tuesday as Fed Chairman Jerome Powell opens two days of Congressional hearings. The head of the central bank was firmly convinced that the Fed was not considering raising interest rates, but Powell’s comments are being scrutinized for possible insights into the economy’s inflation outlook.
Inflation fears have risen in recent weeks as policymakers debate another round of economic relief as Covid cases decline. Investors fear that, despite the Fed’s promises, a price hike on stimulus could force the central bank to raise short-term borrowing costs.
The US exceeded 500,000 deaths from the virus on Monday, according to Johns Hopkins University.
On corporate developments, Facebook has reached an agreement with the Australian government and will restore news sites in the country just days after being restricted.
