S&P 500 hits one-year low as higher bond yields pressure growth stocks

The S&P 500 index fell to its lowest since April 2021 on Monday as higher US Treasury yields hit growth stocks amid prospects of aggressive policy tightening, while investors grappled with fears of a sharp economic slowdown in China.

All of the 11 major S&P sectors declined. The energy sector tumbled 6% on the back of a 2% drop in oil prices, as weak China data and a tighter Covid-19 lockdown in Shanghai deepened fears of a potential global slowdown.

The tech-heavy Nasdaq dropped 3.1% to its lowest level since Nov 2020 as megacap stocks Microsoft Corp, Amazon.com, Apple Inc, Google-owner Alphabet Inc, Meta Platforms and Tesla Inc fell between 1.6% and 6.2%. Chipmakers dropped 4%.

Benchmark 10-year U.S. Treasury yields were at 3.08% after hitting their highest levels since November 2018 earlier in the session as expectations of higher interest rates unnerved investors.

After a 50 basis points increase in interest rates this month by the US central bank, many traders expect a hike of another 75 basis points at the June meeting.

“The concern here is that the Federal Reserve is going to essentially ignore market conditions and equity market volatility and continue on with rate hikes,” said Matt Stucky, senior portfolio manager at Northwestern Mutual Wealth Management.

At 11:52 a.m. ET, the Dow Jones Industrial Average was down 486.39 points, or 1.48%, at 32,412.98, the S&P 500 was down 93.43 points, or 2.27%, at 4,029.91, and the Nasdaq Composite was down 373.29 points, or 3.07%, at 11,771.38.

Investors will keep a close eye on US inflation data for April for clues on whether price pressures are reaching a peak.

“You have to look pretty hard for positive catalysts in the current market environment,” said Brian Price, head of investment management, Commonwealth Financial Network.

“Any positive developments on the geopolitical front, or a weaker than expected CPI report later this week, could help turn the tide and see investors embrace risk assets once again.” Technology-focused growth stocks have borne the brunt of the selloff this year as their returns and valuations are discounted more deeply when yields rise.

The S&P 500 growth index has dropped 23.4% so far this year, compared to a 15.5% fall in the benchmark index.

The first-quarter earnings season is on its final leg, with nearly 80% of the 434 S&P 500 companies that have reported results so far topping estimates, according to Refinitiv.

Twitter Inc slipped 2.2% as Hindenburg Research took a short position on the social media company’s stock, saying the company’s $44 billon deal to sell itself to Elon Musk has a significant risk of getting repriced lower.

Declining issues outnumbered advancers for a 7.03-to-1 ratio on the NYSE and for a 5.36-to-1 ratio on the Nasdaq.

The S&P index recorded one new 52-week highs and 66 new lows, while the Nasdaq recorded 11 new highs and 1,030 new lows.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor