Frankfort, New York After the bank holiday long weekend, rising bond yields weighed heavily on US stock markets on Tuesday. Investors are increasingly expecting interest rate hikes by the US Federal Reserve due to persistently high inflation. Yields on 10-year US bonds rose to their highest level in two years – and at the same time weighed on stocks, particularly technology stocks on the Nasdaq. The banking sector also had to take a beating because the investment bank Goldman Sachs disappointed with its quarterly report.
After the long weekend in the US, the US blue chip index Dow Jones fell 1.5 percent to 35,368 points and the broad S&P 500 fell 1.8 percent to 4577 points.
The tech-heavy Nasdaq fell 2.6 percent to 14,506 points. Government bonds also flew out of the depots. That pushed the yield on the benchmark 10-year Treasury to a two-year high of 1.863 percent. The two-year stocks, which were also observed, returned more than one percent for the first time since the beginning of 2020.
Investors feared faster rate hikes by the US Federal Reserve because of persistently high inflation, said Neil Wilson, chief analyst at online broker Markets.com. Even an increase of half a percentage point can no longer be completely ruled out. “If you read the recent comments by the US Federal Reserve and their boss Jerome Powell, according to the Fed the greatest threat to the economy and thus to the labor market is inflation.”
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Against this background, the price of US crude oil WTI rose by up to 2.9 percent and at $86.27 per barrel (159 liters) was the highest it was more than seven years ago. The drone attack by Yemeni Houthi rebels on tankers in Abu Dhabi has fueled speculation about supply disruptions at a time when supply is already tight, Markets.com analyst Wilson said. Investors’ nervousness is exacerbated by tensions between Russia and Ukraine.
The WTI rally gave a boost to US oil majors. Exxon’s stock rose 1.71 percent and Chevron’s stock rose 0.29 percent. At 130 dollars, the latter was at times as high as it was almost four years ago.
Goldman Sachs stocks also lost a lot of ground, falling 6.97 percent. Analyst Daniel Fannon from the investment bank Jefferies complained that the money house’s profit fell short of expectations. Reasons for this include higher costs and provisions for bad loans. In the wake of Goldman Sachs, the titles of rivals Citigroup, JPMorgan and Morgan Stanley fell by up to 4.93 percent. The first two had also presented disappointing numbers last week. The latter wants to open his books on Wednesday.
Wall Street expert Koch: “Mega deal in the tech sector – but the market continues to tremble”
Activision Blizzard shares, on the other hand, briefly saw their biggest daily gain in more than 27 years. They then closed up 25.88 percent to $82.31. The software company Microsoft is facing a mega takeover and wants to take over the provider of video games such as “Call of Duty” or “Candy Crush” for $95 per share or a total of almost $70 billion.
It would be the world’s largest deal in this sector to date and fueled takeover fantasies. Against this background, the titles of Activision’s rival Electronic Arts (“Fifa2022”) grew 2.66 percent. Microsoft shares fell 2.43 percent.
Otherwise: The interest rate hike speculation put the other technology stocks under pressure. In this sector, the wheat will soon be separated from the chaff, predicted Thomas Hayes, manager at asset manager Great Hill. “Those companies that promise profits for tomorrow but don’t make any today will be crushed.”
Look at other individual values
Biontech: A study on the effectiveness of a second coronavirus booster vaccination against the omicron variant is sending Biontech into a tailspin. The biotech’s Wall Street-listed shares fell 13.66 percent. According to an Israeli study, a second booster with the Biontech serum increases the antibody level, but cannot prevent Omicron infections. The papers of Biontech development partner Pfizer fell 1.56 percent. Shares in rivals Moderna and Novavax fell as much as 11.17 percent.
Alibaba: The stock fell more than 2.26 percent. According to a media report, the Biden administration is to review the China-based company’s cloud unit to see if it poses a risk to US national security. The investigation is said to focus on how e-commerce giant Alibaba stores US customers’ data.
Ford: Production downtime is a problem for the carmaker. Ford shares fell 3.22 percent on Wall Street. Due to a lack of chips, the company says it has to stop production at a US plant.
Citrix Systems: According to a media report, Elliott Investment Management and Vista Equity Partners are said to be in advanced talks about buying the software company. Citrix stock is up 5.43 percent.
gap: The stock fell 6.73 percent after US bank Morgan Stanley downgraded the clothing retailer’s stock to underweight from balance.
Unilever: The consumer goods maker has submitted a $68 billion bid for Glaxo-Smithkline’s (GSK) consumer health business. As a result, Unilever shares fell by 14.44 percent. This offer was the third to take over this unit. So far, every offer has been rejected as undervalued. Glaxo-Smithkline shares gained 2.97 percent.
Peloton: The company will begin charging for setup and delivery of its bikes and treadmills starting January 31, previously included in the retail price. Peloton will charge $250 for setup and delivery of its bikes and $350 for its treadmills. The stock fell 3.51 percent.
Kohl’s: Shares in the US department store chain rose 4.14 percent. According to insiders, the financial investor Acacia approached the company and signaled interest.
More: These eight stocks are the beacons of hope for the stock market year 2022