NEW YORK (awp international) – After a long weekend due to the bank holiday, 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.
The leading US index Dow Jones Industrial fell by 1.51 percent to 35,368.47 points. The market-wide S&P 500 slipped 1.84 percent to 4577.11 points. The tech-heavy Nasdaq 100 lost even more, down 2.57 percent to 15,210.76 points. There is now a threat of a relapse to the lowest level in three months. Rising interest rates are a particular burden for high-growth companies, primarily in the technology sectors. The prices of chip manufacturers and their suppliers came under pressure.
In view of the high inflation in the USA, currently at seven percent, countermeasures by the Fed are becoming increasingly likely. Up to four rate hikes of 0.25 percentage points each are expected on the markets this year. Individual market participants can imagine even larger rate hikes. Otherwise, the Fed is threatened with a loss of credibility, some argue. Also on the horizon is the possibility that the Fed could soon scale back its balance sheet, which has ballooned to about $8.8 trillion.
Among individual stocks, shares of Activision Blizzard shot up nearly 26 percent. Microsoft wants to acquire the video game provider in a deal worth almost 70 billion dollars. With a closing price of just over $82, Activision Blizzard stayed well below the $95 per share offered by Microsoft in cash. The reason for this could be antitrust concerns about the deal. The software giant Microsoft, which is behind the Xbox gaming console, secures popular games such as “Call of Duty” and “Candy Crush”. Microsoft stocks fell 2.4 percent.
Investment bank Goldman Sachs suffered a slump in profits in the fourth quarter on the back of weaker trading revenues. In the final quarter of 2021, the financial group earned 13 percent less than a year ago. Analysts had expected a better result. As the biggest loser in the Dow, Goldman shares fell by around seven percent and dragged down the paper of other banks such as JPMorgan and Morgan Stanley, which lost between around four and almost five percent, respectively.
With a view to the papers of vaccine manufacturers, investors pulled the rip cord on Tuesday: Biontech, Curevac, Moderna and Novavax posted price losses of eight to almost 14 percent. According to dealers, they suffered from the prospects of an improving situation worldwide in the corona pandemic. Analysts had increasingly argued that the omicron virus is very contagious, but the course of the disease is easier than with the delta variant.
Firming expectations of rising US interest rates pushed up the US dollar and weighed on the euro. This was paid at $1.1324 in the late US currency trade. The European Central Bank had previously set the reference rate at 1.1367 (Monday: 1.1403) dollars. The dollar had thus cost 0.8797 (0.8770) euros.
On the US bond market, the futures contract for ten-year Treasuries (T-Note Future) fell by 0.69 percent to 127.30 points. In return, the yield on ten-year government bonds rose to 1.875 percent and thus to another high for two years./bek/zb
— By Benjamin Krieger, dpa-AFX —
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