Nasdaq Falls 2% as Tech Selloff Batters Indexes: Markets Wrap

(Bloomberg) -- U.S. stocks declined Monday as a selloff in technology stocks resumed on the threat of persistently high inflation. 

The S&P 500 fell 1.3% -- dipping below its 100-day moving average -- while the Nasdaq 100 shed 2.2% and the Dow Jones Industrial Average slid 0.9%.

The losses were led by high-growth technology companies -- including Amazon.com Inc. and Facebook Inc. -- while vaccine makers also fell on Merck & Co.’s announcement about an effective Covid-19 drug. Energy stocks, meanwhile, rose along with oil prices.

“There’s a wall of worry that markets are trying to climb at the moment,” said Deutsche Bank strategist Jim Reid in a note. “We have an energy crisis, supply chain issues, higher inflation, signs of weaker growth, and lots of talk about stagflation.”

Global markets have taken a risk-off turn amid a growing list of worries, just as investors have been bracing for the Federal Reserve to begin tapering stimulus as early as next month. Higher inflation and Treasury yields make the premium investors pay for high-growth stocks less attractive. The risk to earnings may also be higher for some tech companies.

“Technology stocks are most likely getting hit the hardest because higher interest rates means higher discount rates for future earnings,” said Brian Price, head of investment management for Commonwealth Financial Network. “I would expect this dynamic to continue as long as inflation expectations remain at the higher end.”

Fears of a spreading energy crisis also added to concerns about inflation Monday with European power and gas prices surging before the onset of winter. The power contract for November in Germany hit a record while natural-gas futures extended a rally. Meanwhile, crude oil in New York surged to the highest since 2014 as OPEC+ agreed to an output hike for November.

“The post-pandemic recovery appears to be stumbling,” said Fiona Cincotta, senior financial markets analyst at City Index. “Supply shortages and a worsening energy crunch mean prices are rising and elevated inflation may not be as transitory as the Fed initially thought.”

President Joe Biden warned Monday that the U.S. government was also at risk of breaking its legal debt limit, describing the risk as a “meteor” headed for the economy.

The yield on the U.S. 10-year Treasury rose to 1.48%, paring back earlier gains. The dollar slid for a third day. And equities in Europe, Japan and Hong Kong fell. 

Markets in mainland Chinese are closed through Thursday for the Golden Week holidays. 

For more market analysis, read our MLIV blog.

Here are some events to watch this week:

• Reserve Bank of Australia policy decision Tuesday
• Rate decision in New Zealand on Wednesday
• Reserve Bank of India monetary policy decision on Friday
• The U.S. Labor Department releases unemployment and job creation data Friday
• Annual Nobel announcements start on Monday, with the Peace Prize being awarded on Friday

Some of the main moves in markets:

Stocks

• The S&P 500 fell 1.3% as of 4 p.m. New York time
• The Nasdaq 100 fell 2.2%
• The Dow Jones Industrial Average fell 0.9%
• The MSCI World index fell 1%

Currencies

• The Bloomberg Dollar Spot Index fell 0.2%
• The euro rose 0.2% to $1.1621
• The British pound rose 0.5% to $1.3613
• The Japanese yen rose 0.1% to 110.93 per dollar

Bonds

• The yield on 10-year Treasuries advanced two basis points to 1.48%
• Germany’s 10-year yield advanced one basis point to -0.21%
• Britain’s 10-year yield was little changed at 1.01%

Commodities

• West Texas Intermediate crude rose 2.2% to $77.54 a barrel
• Gold futures rose 0.6% to $1,769.50 an ounce

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