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Wall St sinks as yields spike, financials fall after Goldman miss

Stock MarketsJan 18, 2022 07:47PM ET
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2/2 © Reuters. FILE PHOTO: Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., January 12, 2022. REUTERS/Brendan McDermid 2/2

By Lewis Krauskopf, Bansari Mayur Kamdar and Shreyashi Sanyal

(Reuters) - Wall Street's main indexes fell sharply on Tuesday as weak results from Goldman Sachs (NYSE:GS) weighed on financial stocks and tech shares continued their sell-off to start the year as U.S. Treasury yields rose to milestones.

The Nasdaq dropped most among major indexes on Tuesday and now has fallen about 9.7% from its Nov. 19 record closing high, close to confirming a 10% correction for the first time since early 2021. The tech-heavy index also closed below its 200-day moving average, a key technical support level, for the first time since April 2020.

Goldman Sachs shares tumbled 7% after the investment bank missed quarterly profit expectations amid weak trading activity. The financials sector, which has been one of the better-performing groups in 2022, dropped 2.3%.

“The financials crumbling a little bit under the weight of less-than-impressive earnings quarters is probably the biggest factor today,” said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana. “When you have taken out potentially one of the areas that actually was working here, that kind of casts a pall on the market.”

Benchmark U.S. Treasury yields jumped to two-year highs and two-year yields breached 1% as traders prepared for the Federal Reserve to be more aggressive in tackling unabated inflation.

The steep ascent in yields to start 2022 has weighed in particular on tech and growth stocks, whose future expected cash flows are discounted more sharply as yields rise.

“The hot inflation prints have spooked the market that the Fed is going to move and so we are seeing this rise in yields,” said Mona Mahajan, senior investment strategist at Edward Jones.

"It’s not only the rise in yields but the rapid rise in yields ... that really does cause some indigestion in the market, but particularly in growth, higher valuation, more speculative asset classes,” Mahajan said.

The Dow Jones Industrial Average fell 543.34 points, or 1.51%, to 35,368.47, the S&P 500 lost 85.74 points, or 1.84%, to 4,577.11 and the Nasdaq Composite dropped 386.86 points, or 2.6%, to 14,506.90.

Of 11 S&P 500 sectors, 10 ended lower, with technology falling the most. Energy, the top-percentage gainer so far in 2022, was the lone sector in positive territory, rising 0.4%.

Declines in megacap stocks, including Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL) and Meta Platforms, weighed heavily on the S&P 500 among individual shares.

A BofA survey showed that fund managers had cut their overweight positions in tech to their lowest levels since 2008, while another survey by Deutsche Bank (DE:DBKGn) found that a majority of respondents believed U.S. technology stocks are in bubble territory.

Investors are zeroing in on next week's Fed policy meeting for more clarity on central bankers' next moves to rein in inflation. Data last week showed U.S. consumer prices increased solidly in December, culminating in the largest annual rise in inflation in nearly four decades.

In company news, Activision shares soared nearly 26% after Microsoft announced a deal to buy the video-game maker for $68.7 billion. Shares of other video game companies rose, with Electronic Arts (NASDAQ:EA) up 2.7% and Take-Two (NASDAQ:TTWO) Interactive Software up 1%. Microsoft shares fell 2.4%.

Declining issues outnumbered advancing ones on the NYSE by a 5.52-to-1 ratio; on Nasdaq, a 4.93-to-1 ratio favored decliners.

The S&P 500 posted 34 new 52-week highs and nine new lows; the Nasdaq Composite recorded 69 new highs and 611 new lows.

About 11.9 billion shares changed hands in U.S. exchanges, compared with the 10 billion daily average over the last 20 sessions.

Wall St sinks as yields spike, financials fall after Goldman miss
 

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Comments (35)
Bebeto Wallace
Bebeto Wallace Jan 19, 2022 7:31AM ET
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Microsoft going in to gaming should push the NASDAQ composite up
Mark Stallone
Mark Stallone Jan 18, 2022 10:04PM ET
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You think this is bad? Just wait. Elections have Consequences.
Chris Hall
Chris Hall Jan 18, 2022 6:32PM ET
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cry bubble they created from its fallacy of a V shaped recovery push handful of stocks to get the 1% to double their fortunes ... meanwhile driving prices of everything up 30% ... as usual wallstreet is about to create a recession due to appetite for greed just like 2008
Matt Kay
Matt Kay Jan 18, 2022 4:26PM ET
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Relaaaaax. We all know that stonks only go up. JPOW got his fist up the printer to BRRR into prosperity.
Gus McCrae
Gus McCrae Jan 18, 2022 3:13PM ET
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I want to see a bit more red and then a good consolidation. I have a lot of savings ready and my finger is itchy
Brian Walsh
Brian Walsh Jan 18, 2022 3:13PM ET
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I'm in the same boat, patiently waiting to come off the sidelines & back into the game.
Gus McCrae
Gus McCrae Jan 18, 2022 3:13PM ET
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I got in in March 2020 and added a bit afterwards. I was eagerly looking for a other good entry like millions of people around the world. I have my playing account but the bulk will go to the long term one as soon as we hit -10% and then adding every -5%
Todd Gray
Todd Gray Jan 18, 2022 2:59PM ET
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Rooters means, the myriad of crutches have temporarily been removed. Ridiculous leadership. Joke of the world, and have been for decades. Doesn't bother them a bit.
Dave Jones
Dave Jones Jan 18, 2022 2:58PM ET
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Oh yeah by the way what isn't being reported is the Chinese banking sector is about to collapse
Dave Jones
Dave Jones Jan 18, 2022 2:57PM ET
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Bifurcated hmmm?
Mitchel Pioneer
Mitchel Pioneer Jan 18, 2022 2:01PM ET
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And here comes the miracle "in late trade," predictable as ever.  Assume the proper position America.  What an absolute joke.
Mitchel Pioneer
Mitchel Pioneer Jan 18, 2022 1:46PM ET
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More losses maneuvered out of the system, as the fraud continues in broad daylight.
 
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