The Nasdaq fell more than 1 percent on Monday, leading Wall Street’s main indexes lower, as rising bond yields weighed on megacap stocks such as Microsoft and Apple with investors on edge ahead of Tuesday’s inflation data.
Shares of Microsoft Corp., Apple Inc., and Nvidia Corp. fell between 1.9 percent and 4.1 percent as the benchmark 10-year Treasury yield climbed to 2.75 percent after touching a fresh three-year high earlier in the day.
The S&P 500 technology index slid 1.9 percent, the most among the 11 major S&P sectors, while the Philadelphia semiconductor index dropped 1 percent.
Market-leading growth and technology stocks, that were underpinned by record low interest rates, have come under pressure since late March on signals from the Federal Reserve that it will hike rates aggressively to control soaring inflation.
Data on Tuesday is expected to show U.S. consumer prices leapt to a fresh four-decade high of 8.5 percent in March, on a year-on-year basis, after hitting 7.9 percent in February, as the Ukraine conflict drives up energy costs.
“The problem for stocks to gain momentum right now is that it is really unclear where the peak in inflation is,” Eric Merlis, managing director of global markets at Citizens Financial Group, said.
“If we thought the Fed had a handle on inflation and the war wasn’t going to spill over anymore into Europe, you would see growth stocks rally pretty convincingly. But we’re not there.”
Electric-car maker Tesla Inc. fell 2.1 percent after data showed China auto sales plunged in March, hurt by the country’s curbs to rein in COVID-19 outbreaks.
Nvidia fell 4.0 percent after Baird downgraded the chipmaker. Chip stocks have been among the worst casualties of the tech sell-off, down 22 percent so far this year compared to the 13.5 percent decline in Nasdaq.
Investors will also be focusing on the big U.S. banks, which kick off the first-quarter earnings season on Wednesday. They are expected to show a sharp decline in quarterly earnings from a year earlier.
However, the prospect of higher rates boosted financials, with the S&P 500 banks index rising 1.7 percent.
The S&P 500 value index, which includes banking and energy stocks, has outperformed its growth counterpart so far this year, with the former nearly flat, while the growth index is down 13 percent.
At 10:13 a.m. ET, the Dow Jones Industrial Average was down 52.55 points, or 0.15 percent, at 34,668.57, the S&P 500 was down 33.61 points, or 0.75 percent, at 4,454.67, and the Nasdaq Composite was down 146.94 points, or 1.07 percent, at 13,564.06.
Twitter Inc. rose 2.8 percent, reversing all of its premarket losses after the social media company said Tesla boss Elon Musk rejected its offer to join the company’s board.
Media and streaming firm Warner Bros Discovery Inc., formed from the $43 billion merger of Discovery Inc. and assets of AT&T Inc., rose 3.6 percent on the first day of trading. AT&T shares gained 5.0 percent.
Declining issues outnumbered advancers for a 1.23-to-1 ratio on the NYSE and a 1.26-to-1 ratio on the Nasdaq.
The S&P index recorded 31 new 52-week highs and eight new lows, while the Nasdaq recorded 24 new highs and 205 new lows.
By Bansari Mayur Kamdar and Praveen Paramasivam