The Dow falls nearly 165 points, but technology stocks are making a big comeback

The broader market fell on Monday: the Dow fell by around 163 points, or 0.5%, while the S&P 500 fell 0.1%. However, both indices closed well off their lowest levels for the day. Meanwhile, Nasdaq managed to end the day with a slight rise, a significant turnaround after falling more than 2% at some point on Monday.

Growth stocks in particular have fallen so far this year due to fears that inflation will slow the economy.

The so-called FAANG shares – Facebook owner Metaplatforms (FB), apple (AAPL), Amazon (AMZN), Netflix (NFLX) and Google Owner Alphabet (GOOGL) ̵[ads1]1; are all in the red for 2022. It is too Microsoft (MSFT) and chip giant Nvidia (NVDA) while Elon Musk is Tesla (TSLA) is flat.

The Nasdaq is now 8% below the recent high, putting it at risk of falling into a correction, defined as 10% lower than the recent peak. The Dow and S&P 500 are each about 3% below their peak levels.

The SPDR Portfolio S&P 500 Growth (SPYG) ETF is down 4% already in 2022 while iShares Russell 2000 Growth (IWO) The ETF, which owns shares in smaller growth stocks, has plunged 6.6% since the beginning of the year.
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“If the first week of the year is any indication of what to expect in the coming months, investors will need to be nimble by 2022, and be aware of any major exposure they may have to growth stocks,” said Solita Marcelli, chief investment officer. officer for America at UBS Global Wealth Management, in a report Monday.

It is worth noting that two important value sectors, financial stocks and oil companies, are flourishing.

The Invesco KBW Bank (KBWB) The ETF was flat on Monday and is up 10% this year. Banks benefit from higher interest rates because it makes lending more profitable.

The yield on the US 10-year government bond rose to its highest level since January 2020, briefly topping the 1.8% level.

Investors will be eager to see which megabanks JPMorgan Chase (JPM), Citigroup (C) and Wells Fargo (WFC) say about higher bond yields when they report earnings on Friday.
And Energy Select Sector SPDR (XLE) ETF, as owner Exxon Mobile (XOM), Chevron (CVX), ConocoPhillips (POLICEMAN) and other oil giants, are up 10% this year as crude oil prices have risen from around $ 72 a barrel to $ 78 in the last month.
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So not all sectors will be hurt by inflation, and it seems that savvy investors are starting to make changes to their portfolios as the big winners of the bull run in recent years are finally starting to lose their luster.

“Technology stocks have led the market for most of the past two years,” analysts at the Morgan Stanley Wealth Management Global Investment Committee said in a report on Monday. They noted that lower interest rates and the trend of working from home during the pandemic helped increase technology.

But the prospect of higher prices will be a problem for technology and other growth stocks going forward.

“Global policy tightening has offset Covid’s estimated burden on economic growth, and technology has begun to underperform,” Morgan Stanley analysts wrote, adding that now is a time when investors should try to actively choose stocks instead of passively relying on the big ones. the indices dominated by technology leaders.

UBS ‘Marcelli also noted that “valuations for growth companies should be compressed faster in relation to value shares” when the Fed raises interest rates.

“And that’s exactly what’s happened in the first week of the year,” she said, adding that “more speculative, very fast-growing, unprofitable technology companies have fallen even more” than the top technology on Nasdaq.

Investors are also continuing to flee from cryptocurrencies. Bitcoin (XBT) Prices fell below $ 40,000 early Monday before retreating slightly. Ethereum prices fell below $ 3,000 before jumping back.
Bitcoin has now plunged more than 10% in the last week, while ether has fallen almost 20%.

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