Wall Street slumped on the first trading day to start the week after Monday's holiday amid fears of an accelerating pace of the Fed's moves on tightening monetary policy. The Dow Jones fell 1.51%, the S&P 500 slumped 1.84%, and Nasdaq shed 2.6%. Nasdaq closed under the 200-day moving average for the first time since April 2020.
Ten out of 11 sectors closed in red. Technology and financials led the broader markets' losses. The growth stocks have been sold off since the beginning of January due to surging bond yields. The Fed indicated to speed up tapering and potentially bring forward the timeframe on rake hikes as early as March. The central bank also says to start unwinding its balance sheets from this year, which will allow securities to mature naturally and tighten up on liquidity.
The growth stocks suffered the most as investors speculate an aggressive tightening monetary policy will lower the valuation in the tech stocks, especially for those who are in the early stages of developing with long-term company debts. The big tech companies all finished lower. Apple and Amazon were both down near 2%. Microsoft slid 2.34% after it announced it is to buy video game company, Activision Blizzard, in an all-cash transaction of $68.7 billion. Alphabet fell 2.38%, and Meta Platform was down 4%. The chip makers, Nvidia and AMD both lost more than 3%. Tesla was down 1.82%.
The financial sector also fell sharply after Goldman Sachs' fourth-quarter earnings disappointed the markets. The bank’s EPS reported at $10.81 vs. $11.76 estimate, according to Refinitiv. Its operating cost surged 23% because of increased pay for employees. The company’s shares price slid 7% on the news, leading the whole financial stocks to lose 2.3%.
Currencies
The US dollar strengthened due to a spike in the US bond yields. The dollar index was up 0.58%, to 95.71. All of the other major currencies weakened again the dollar. EUR/USD was down 0.72%, to 1.1325. Sterling fell 0.37%, to 1.3596. And JPY was flat again the USD after the BOJ suggests Japan’s economy might not be immune to surging inflation, which indicates a potential pull-back on its stimulus might not be far. It is also the first time BOJ adjusted its view on inflation since 2014.
Most of the commodity currencies were lower against the greenback too. The Canadian dollar still holds a relatively strong position again the USD, supported by a rising oil price. USD/CAD was flat at 1.2513. However, the Lonnie was down 3.4% against the US dollar since late December 2020.
Commodities
Energy is the only sector that closed higher as the oil prices keep the pace of gaining. The fuel prices continue to climb on the news of the Houthi air raids in the UAE. The WTI futures price rose 3.26%, to $86.55 per barrel. Brent futures were up 2.29%, to $88.44.
The gold futures price was down $3, to $1,813 per ounce. The precious metal has been moving in a tight range between $1,780 and $1,830 since late December. From the macro perspective, the base metal’s price has been pressed by a strong dollar and rising bond yields. But the same time, it is being seen as a safe-haven asset during the period of the crash in the stock markets.
Treasuries
The US treasury yields spiked. The 2-year treasury yields rose to above 1%, the first time since February 2020. And the 10-year treasury yield surged to 1.87%, to a pre-pandemic level.
