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Tech stocks are falling, prolonging last week’s losses




Technology stocks fell on Monday as government bond yields continued to rise, signaling that investors expect the Federal Reserve to move rapidly in raising interest rates.

The technology-heavy Nasdaq Composite Index fell 2.6 percent. The benchmark index last week posted its largest percentage decline in one week since February, when rising bond yields punctured technology values. The S&P 500 fell 1.9% in Monday trading, while the Dow Jones Industrial Average fell 1.6%, or 578 points.

Chipmaker Nvidia,

one of the best stocks in 2021, fell 5%. Google parent Alphabet, Apple and Microsoft all went down more than 2%.

The technology losses came when the return on the benchmark index for 1[ads1]0-year government bonds – which moves in reverse to the price – rose to 1.798% on Monday from 1.769% on Friday. Friday’s closing level was the highest since January 2020, before returns fell at the start of the pandemic.

Rising interest rates at the beginning of 2022 have sent shockwaves through technology stocks. By selling bonds and sending higher returns, investors indicate that they believe the Fed could raise short-term interest rates in March and begin shrinking its holdings of bonds and other assets shortly thereafter.

Low interest rates contributed to a huge rise in technology stocks last year, making it less attractive for investors to hold bonds and encouraging them to buy risky assets. But as the Fed has focused on fighting inflation in recent weeks, technology stocks have lost some of their luster.

US inflation data coming on Wednesday will be closely monitored as investors try to predict when the Fed will start raising borrowing costs. Monthly consumer prices are expected to have risen more than 7% from the previous year, for the first time since 1982.

Traders on the New York Stock Exchange on Friday.


Photo:

Spencer Platt / Getty Images

The earnings season starts at major US financial firms later this week, with JPMorgan Chase, Citigroup,

Wells Fargo and BlackRock due to archive results for the last quarter of 2021. Many investors have squeezed money into bank shares, and expect that they will benefit from an increase in interest rates.

Among them is Hani Redha, a multi-active fund manager at PineBridge Investments. He said the New York-based investment company has cut its ownership of technology stocks and treasuries, while increasing cash and exposure to finance companies.

“Stocks are down and bonds are down too,” Mr. Redha said. “At least for a while, even cash is better than owning risk assets.”

In individual shares, Take-Two Interactive fell 14% after the video game maker agreed to buy Zynga in a $ 11 billion deal. Zynga rose more than 40%. Lululemon fell 5.8% after saying that fourth-quarter earnings would fall towards the low end of forecasts.

GameStop,

a favorite among individual traders, lost 14%, after jumping last week after The Wall Street Journal reported that they planned to enter the non-fungible tokens and cryptocurrency markets.

In raw materials, US natural gas prices rose 4.1% to $ 3.88 per million British thermal units. Cold weather in the Midwest and eastern United States earlier this week is likely to increase fuel demand, according to analysts at NatGas Weather.

The US dollar last year saw its largest increase in value since 2015. It is good for many US consumers, but it can also put a dent in equities and the US economy. WSJs Dion Rabouin explains. Photo illustration: Sebastian Vega / WSJ

Overseas stock markets were mixed. Stoxx Europe 600 fell 1.4%, weighed down by shares in real estate and technology companies.

In Asia, the Shanghai Composite Index rose 0.4% and Hong Kong’s Hang Seng rose 1.1%. Japanese markets were closed due to a public holiday.

Mark Andersen, head of asset allocation at UBS Global Wealth Management’s Chief Investment Office, said he favors European and Japanese stocks and shares in energy and finance companies.

“It is clear that the Fed wants to tighten financial conditions and the funds to do so are obviously getting higher interest rates,” he said.

Write to Joe Wallace at joe.wallace@wsj.com

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