Breaking News

Nasdaq opens 2% lower as tech sell-off continues

Stocks dropped again on Tuesday as tech shares continued to tumble in the face of higher interest rates and a rotation into stocks more linked to the economic comeback.

Of the three major indexes, the Nasdaq Composite suffered the worst of the losses and traded down by 2.3%. The move during the session pushed it below its 50-day moving average, a key technical indicator, for the first time since Nov. 3.

The S&P 500 dropped 1.1% while the Dow Jones Industrial Average shed 227 points for a decline of 0.7%. Stocks traded off their morning lows slightly after Fed Chair Jerome Powell’s prepared testimony to Congress said that inflation was “soft,” easing fears of a policy change by the central bank.

Losses incurred during Tuesday’s session added to a growing divergence between key areas of the market. The tech-heavy Nasdaq Composite, which slid 2.5% on Monday, is down more than 5% so far this week.

The Dow, which includes a greater proportion of cyclical stocks, is down a far-more-modest 0.7% since Friday’s close as investors snap up names they think will benefit from an economic recovery. Travel stocks, including airlines and cruise lines, have risen sharply across the board, but popular tech names Apple and Tesla are among key decliners.

Tesla fell nearly 11% on Tuesday, bringing its week-to-date losses to 18%, following a 9% decline on Monday. Apple lost 4.3% after a 3% slide on Monday. The iPhone maker’s stock is down 13.5% over the last month.

The 10-year Treasury yield, which has risen steadily since the start of 2021, held steady on Tuesday around 1.36%. So far this month, the benchmark rate has moved up hefty 28 basis points. The 30-year yield touched a one-year high of 2.2% Monday. A basis point is 0.01%.

“The higher Treasury yields move up, the quicker investors are rotating out of high-flying tech stocks and into stocks in the Russell 2000 Index and Dow Jones Industrial Average,” OANDA senior market analyst Edward Moya said in a note.

The bond market will likely remain a key topic of discussion on Tuesday, as Fed Chair Jerome Powell begins two days of congressional hearings. Powell said in his prepared testimony that inflation remains “soft” and that the economy is a long way from its employment goals.

The central bank chief has been adamant that the Fed is not considering raising its benchmark interest rate, but Powell’s comments will be scrutinized for possible insight 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 spike in prices the result of federal stimulus could force the central bank’s hand to raise short-term borrowing costs.

The U.S. surpassed 500,000 deaths from the virus on Monday, according to Johns Hopkins University.

In corporate developments, Facebook reached an agreement with the Australian government and will restore news pages in the country again, just days after restricting them.

Source link