A decline in technology stocks dragged down major U.S. stock indexes Thursday, leaving the Nasdaq Composite at its lowest close since October.
Technology stocks have come under pressure in the new year as government-bond yields have risen. Higher yields can reduce the appeal of the future earnings promised by many tech stocks.
The S&P 500 fell 67.32 points, or 1.4%, to 4659.03. The Dow Jones Industrial Average dropped 176.70 points, or 0.5%, to 36113.62. The tech-heavy Nasdaq Composite slumped 381.58 points, or 2.5%, to 14806.81.
The largest U.S. stocks helped pull the market lower, with
shares falling $3.34, or 1.9%, to $172.19, and
shares sliding $13.47, or 4.2%, to $304.80.
The technology sector fell 2.7%, making it the worst-performing group in the S&P 500. The decline brought the tech segment’s year-to-date losses to 5.6%.
The yield on the benchmark 10-year U.S. Treasury note ticked down to 1.708% Thursday, from 1.724% Wednesday. It remains well above the 1.496% at which it finished 2021. Bond yields rise as prices fall.
When yields on longer-term bonds move higher, “you tend to reprice those growth stocks,” said
national investment strategist at U.S. Bank Wealth Management. “If you increase that interest rate, that puts pressure on your present value of those companies.”
Investors are keeping a close watch on any developments that could affect the Federal Reserve’s calculations about tightening monetary policy to counter inflation. Central bank officials have signaled that an interest-rate rise could come as soon as March. The Fed’s
said Wednesday that four rises were likely in 2022.
Federal Reserve governor
told Congress on Thursday that efforts to reduce inflation are the central bank’s “most important task.” Ms. Brainard is the White House’s nominee to serve as the Fed’s No. 2 official.
“Our monetary policy is focused on getting inflation back down to 2% while sustaining a recovery that includes everyone,” Ms. Brainard said.
“The main story is the market view on the central bank’s next steps. The market is balancing two things: less support from monetary policy, but overall the underlying economy is good, and we think the earnings figures that will start to come out now will be quite strong,” said
head of investments at SYZ Private Banking.