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Wall Street’s main indexes fell on Tuesday as big technology stocks were slammed by rising Treasury yields, while Goldman Sachs led declines among banks after posting its quarterly profit below expectations.
Two-year Treasury yields, which track short-term rate expectations, crossed 1% for the first time since February 2020 amid traders positioning for a more hawkish Federal Reserve ahead of a policy meeting next week.
Megacap firms including Google’s Alphabet, Apple , Meta, Amazon and Tesla fell between 0.6% and 3.7%.
Ten of the 11 major S&P 500 sectors fell in early trading, with the growth-heavy S&P 500 technology and S&P 500 communication services indexes leading losses.
“Tech is going to be bifurcated between the companies that are earning money today versus the companies that are promising to earn money tomorrow,” said Thomas Hayes, managing member at Great Hill Capital LLC in New York.
“The companies that are promising to earn money tomorrow but not earning today are going to take big haircuts.”
Goldman Sachs plunged 8.0% after missing fourth-quarter profit expectations on weak trading activity, while BNY Mellon shed 1.1% after posting quarterly results.
The S&P 500 banks index fell 1.2%, while the broader financial index tumbled 1.6%.
Energy was the only S&P 500 sector in the black on Tuesday as oil prices edged higher.
At 09:53 a.m. ET, the Dow Jones Industrial Average was down 553.58 points, or 1.54%, at 35,358.23, the S&P 500 was down 68.82 points, or 1.48%, at 4,594.03, and the Nasdaq Composite was down 253.06 points, or 1.70%, at 14,640.69.
A monthly survey conducted by Deutsche Bank found that a majority of respondents believed US technology stocks are in a bubble as investors remained more bearish on hawkish policy moves and higher yields.
Later in the week, a US Senate panel is also set to debate a bill that aims to rein in app stores of companies that some lawmakers say exert too much market control, including Apple and Alphabet’s Google.
The Nasdaq and the S&P 500 fell for a second straight week on Friday as bearish sentiment on tech and disappointing results from big banks weighed on the US indexes made for a soft start to earnings season.
Bank of America and Morgan Stanley will post fourth-quarter results on Wednesday, while Netflix will kick-off reporting among big tech shares on Thursday.
Activision Blizzard surged 29.7% after Microsoft said it would buy the videogame publisher for $68.7 billion in cash, the largest deal in the sector.
Microsoft’s shares slid 1.3%, while other gaming stocks Electronic Arts, Roblox and Take-Two Interactive gained between 0.7% and 7.3%.
Airbnb dropped 3.4% after Gordon Haskett cut the home rental firm’s shares to “hold”.
Declining issues outnumbered advancers for a 3.96-to-1 ratio on the NYSE and for a 3.87-to-1 ratio on the Nasdaq.
The S&P index recorded 30 new 52-week highs and six new lows, while the Nasdaq recorded 54 new highs and 259 new lows.
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