A fresh selloff in bonds sent U.S. stocks sharply lower on Tuesday after a three-day break, with the high-growth technology sector feeling the most pressure at the start of a busy week that also sees investors weighing the start of a busy earnings week.
A blockbuster tech deal was also in the spotlight, after Microsoft Corp. MSFT, -0.36% said it had reached an agreement to acquire Activision Blizzard Inc. ATVI, +28.05% in an all-cash deal valued at $68.7 billion.
What’s happening
- The Dow Jones Industrial Average DJIA, -1.53% dropped 546.62 points, or 1.5%, to 35,365.19.
- The S&P 500 SPX, -1.30% was down 68.24 points, or 1.5%, at 4,594.61.
- The Nasdaq Composite COMP, -1.17% fell 254 points, or 1.7%, to 14,639.75.
Last week, the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite each lost ground, with the tech-heavy Nasdaq now down 5% for the year.
What’s driving markets
The big move in financial markets Tuesday was in bonds, as the yield on the 10-year Treasury TMUBMUSD10Y, 1.841% rose 4 basis points to 1.83%, its highest since January 2020.
Yields on the 2-year Treasury TMUBMUSD02Y, 1.034%, which are more sensitive to Fed policy expectations, shot up 9 basis points, rising above 1% for the first time since early 2020, according to FactSet.
The 200-day moving average in Nasdaq-100 sits around 14,979, noted Peter Garnry, head of equity strategy at Saxo Bank.
“European and U.S. equity futures are flashing red amid a jump in Treasury yields, as investors brace for the Federal Reserve to raise interest rates four times this year to tame inflation,” said Lukman Otunuga, senior research analyst at FXTM.
The week will feature quarterly reports from 35 companies in the S&P 500 index. Goldman Sachs Group Inc. GS, -8.20% on Tuesday said its fourth-quarter profit fell 13%, missing Wall Street estimates, in a choppy quarter for the Wall Street firm. Shares of Goldman Sachs fell 1.5%.
Crude-oil prices CL00, +1.27% rose on Middle East unrest, as Houthi rebels launched a drone attack on a key oil facility in Abu Dhabi. The United Arab Emirates is OPEC’s third-largest producer.
The New York Fed’s Empire State index of business conditions nosedived to -0.7 in January from 31.9 in the prior month, reflecting fresh strains from the omicron virus and ongoing supply-chain bottlenecks.
Which companies are in focus?
- In its biggest ever acquisition, Microsoft MSFT, -0.36% said it would pay $95 per Activision ATVI, +28.05% share to create the world’s third-biggest gaming company measured by revenue, behind Tencent and Sony. Microsoft shares fell 1%, while Activision surged more than 30%.
- Shares of Charles Schwab Corp. SCHW, -3.94% fell 3% after the online brokerage reported earnings and revenue that came in below Wall Street forecasts.
- Shares of Plexus Corp. PLXS, -8.95% were lower after the electronic manufacturing services company warned that it will miss fiscal first-quarter profit and revenue guidance provided in October because of “unanticipated” supply chain challenges that worsened in the finals weeks of the quarter.
How other assets are trading
- The ICE U.S. Dollar Index DXY, +0.37%, a measure of the currency against a basket of six major rivals, rose 0.3%.
- Gold futures GC00, -0.02% edged lower, down 0.2%.
- The Stoxx Europe 600 SXXP, -0.98% fell 1%, while London’s FTSE 100 UKX, -0.57% was down 0.6%.
- The Shanghai Composite SHCOMP, +0.80% rose 0.8%, while the Hang Seng Index HSI, -0.43% was down 0.4% in Hong Kong and the Nikkei 225 NIK, -0.27% off 0.3%.
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