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Wall Street Opens Sharply Lower on Profits, Rates Fears; Dow Down 280 Pts

Stock MarketsJan 10, 2022 09:44AM ET
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© Reuters.

By Geoffrey Smith 

Investing.com -- U.S. stock markets started the week with a fresh lurch to the downside as fears about rising interest rates and weaker corporate profits combined to unsettle investors. 

By 9:40 AM ET (1440 GMT), the Dow Jones Industrial Average was down 282 points, or 0.8%, at 35,949 points, while the S&P 500 was down 1.3% and the Nasdaq Composite was down 1.9%. 

Fear of inflation - and of an aggressive tightening of policy by the Federal Reserve to stop it - was primarily responsible for the move. Having had the weekend to digest an employment report that showed inflationary pressures continuing to build up in the form of higher wages and a rapidly-evaporating pool of spare labor.  Analysts at Goldman Sachs revised their forecasts in response to say that they now expect the Fed to raise rates four times this year, and to start selling down its massive portfolio of bonds as early as July.

In addition, there were signs of sustained supply chain issues eating into corporate profits, as yoga wear maker Lululemon Athletica Inc (NASDAQ:LULU) said its holiday season sales had disappointed. Lululemon stock fell 4% to its lowest since June. However, it remains firmly in the category of companies most at risk from the rising interest rate trends. The stock was still trading at 53 times trailing earnings at Friday's close, despite already coming off its peak by more than 25%.

The most eye-catching move of the morning was driven by M&A news. Zynga (NASDAQ:ZNGA) stock soared by 48% after agreeing to be bought by fellow games publisher Take-Two Interactive Software (NASDAQ:TTWO) in a cash and stock deal valuing the mobile games developer at $12.7 billion. The stock element of the deal weighed heavily on Take-Two's stock price, pushing it down by some 12.7%. 

Another stock under pressure was Coinbase, which suffered by association with the continuing selloff in the cryptocurrencies that generate its revenue. With Bitcoin prices briefly falling below $40,000 for the first time in over four months, Coinbase Global (NASDAQ:COIN) stock fell 6.4%. to its lowest since July.

Tesla (NASDAQ:TSLA) stock also broke through a psychological support level, falling 3.3% to trade below $1,000 for the first time this year despite being named by Goldman analysts as their top pick for the coming year. Cathie Wood's ARK Innovation ETF (NYSE:ARKK), whose outsize bets on growth stocks such as Tesla generated hefty outperformance during the early stages of the pandemic rally, meanwhile continued its recent underperformance. It lost another 4.6% to trade at its lowest since July 2020. 

Elsewhere, Tilray (NASDAQ:TLRY) stock rose 19% after the cannabis company reported a surprise profit for the latest quarter. Moderna (NASDAQ:MRNA) stock was another to defy the general selling, rising 0.2% after raising its sales forecast for 2022 by nearly 10%, while Taiwan Semiconductor Manufacturing (NYSE:TSM) stock rose 1.2% after the chipmaker reported another record-breaking month for sales in December. Going in the other direction was ASML (NASDAQ:ASML) stock, falling 5.7% after the Dutch-based lithographer suffered a fire at one of its manufacturing plants in Europe. It's not clear whether the first will disrupt production of its high-margin equipment for making microprocessors.

Wall Street Opens Sharply Lower on Profits, Rates Fears; Dow Down 280 Pts
 

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Comments (9)
Chad RicherThanYou
Chad RicherThanYou Jan 10, 2022 10:57AM ET
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This is the big one. 401ks to be cut in half
Zebra Lo
Zebra Lo Jan 10, 2022 10:45AM ET
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wallstreet and fund managers had plotted this perfect storm long ago. Now its time to get your money
Simon Braun
Simon Braun Jan 10, 2022 10:43AM ET
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All part of Bidens master plan.
Mitchel Pioneer
Mitchel Pioneer Jan 10, 2022 10:22AM ET
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The knife catchers have arrived.  How many points in losses will miraculously vanish today?
Iyarin Boonnum
Iyarin Boonnum Jan 10, 2022 10:11AM ET
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Dow down down and down...
Chad RicherThanYou
Chad RicherThanYou Jan 10, 2022 10:05AM ET
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I give it 1 week until the fed reverses course
John Whitfield
John Whitfield Jan 10, 2022 9:57AM ET
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been "fearing rate hikes and taper" for 6 months or more. this is what career politicians do. pump our tax money into the market excessively as stimulus then coordinate with MMs and Brokers ( ironic they are some of the biggest campaign "donors" right?) to extract wealth and expand gap
Matt Kay
Matt Kay Jan 10, 2022 9:56AM ET
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Stonks can not go down. Fed print BILLIONS of dollars just to prop it up. All indices will recover starting in 3, 2, 1.....
Casador Del Oso
Casador Del Oso Jan 10, 2022 9:54AM ET
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Profit and rate fears. Have we forgotten about our other fears? Virus, inflation, tax increases, and grossly overvalued stocks.
Yiannis Tsoutsoukis
Yiannis Tsoutsoukis Jan 10, 2022 9:54AM ET
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Do you still see overvalued stocks? Maybe you should do a further research and see how many stocks have gone way down
Casador Del Oso
Casador Del Oso Jan 10, 2022 9:54AM ET
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When VIX is in the 50-60 range, I will consider buying back in.
Martijn WN
Speculeerbeer Jan 10, 2022 9:54AM ET
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Well, historically speaking, many companies still trade at historically high multiples. I can't say that the market isn't right to correct, but the timing seems a little weird. We already knew about the necessity of rate hikes last year.
Yiannis Tsoutsoukis
Yiannis Tsoutsoukis Jan 10, 2022 9:54AM ET
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I get you but there are serious opportunities out there. Companies with huge amount of money on the side that are gonna benefit when this pandemic thing ends. E.g. Disney or leisure companies
 
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