Stocks pared losses heading into market close on Monday, with technology stocks steadying after a rout as investors anticipated higher interest rates this year and looked ahead to several key economic data and earnings reports later this week.
The S&P 500 dropped more than 2% at session lows but ended only marginally lower by the end of the day. The Nasdaq Composite turned slightly positive, erasing earlier losses to end a four-day losing streak. Other risk assets also came under pressure, and Bitcoin prices briefly fell below $40,000 for the first time in about four months.
Treasury yields climbed, and the benchmark 10-year yield topped 1.8% to reach its highest level since January 2020.
"The surge in rates since early December has crushed the valuation of stocks with high growth and low margins, but a well-ordered progression of Russell 3000 stocks implies further repricing," Goldman Sachs chief equity strategist David Kostin wrote in a note.
"We have previously shown the speed of rate moves matters for equity returns," Kostin added. "Equities typically struggle when the 5-day. or 1-month change in nominal or real rates is greater than 2 standard deviations. The magnitude of the recent yield qualifies as a 2+ standard deviation event in both cases."
The move higher in yields and volatility across U.S. equities came after the release of the Federal Reserve's December meeting minutes mid-last week. These suggested some central bank officials were eyeing a quicker start to interest rate hikes and balance sheet runoff process than many market participants had expected. Goldman Sachs economists now predict the Fed will raise interest rates four times this year — or one time more than the firm previously expected — and that the central bank's balance sheet reduction will begin in July or earlier.
Last week's "price action in 10-years was all about what the Fed will do with its balance sheet," Nicholas Colas, co-founder of DataTrek Research, wrote in a note. "We’ll know more on Tuesday, with [Federal Reserve Chair Jerome Powell’s] renomination hearing set for 10 a.m. One thing we’re confident about: equity market volatility is not over yet."
"His confirmation hearing will be a chance for him to further reassure lawmakers and the public that the Fed is focused on reducing inflation in 2022," Colas added. "We expect that to feed further market volatility this week."
In addition to Powell's confirmation hearing before the Senate Banking Committee on Tuesday, investors will also be looking ahead to a new inflation report on Wednesday. The Bureau of Labor Statistics will release the December Consumer Price Index (CPI) that day, which is expected to show an about 7.0% year-over-year jump in prices — or the biggest rise since 1982. And at the end of the week, big banks including JPMorgan Chase (JPM), Citigroup (C) and Wells Fargo (WFC) are each slated to report Friday morning before the opening bell.
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4:09 p.m. ET: Stocks come off session lows, but S&P 500 posts 5th straight day of losses
Here were the main moves in markets as of 4:09 p.m. ET:
Gold (GC=F): +$3.30 (+0.18%) to $1,800.70 per ounce
10-year Treasury (^TNX): +0.9 bps to yield 1.7800%
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12:17 p.m. ET: Tesla shares head for longest losing streak in 10 months amid tech rout
Tesla's (TSLA) stock were on track to post a fifth consecutive session of losses, as shares of the world's most valuable auto-maker by market cap came under pressure amid a broader sell-of in highly valued growth stocks.
A fifth day of losses would mark Tesla's longest losing streak since March of last year. Shares have fallen more than 15% from market close on Jan. 3 through intraday trading on Monday.
The drop also came despite a bullish call from Goldman Sachs, which raised its 12-month price target on the stock to $1,200 from $1,125 previously and maintained a Buy recommendation on shares.
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10:41 a.m. ET: U.S. wholesale inventories revised up in November as restocks pick up
Wholesale inventories in the U.S. were revised up more-than-expected for November, suggesting restocking activity increased and helped alleviate some ongoing supply chain pressures across the economy.
Wholesale inventories rose by 1.4% in the Commerce Department's final monthly print for November, coming in above the 1.2% rise previously reported. This came following a 2.5% increase in inventories in October.
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10:15 a.m. ET: Bitcoin slides, falling below $40,000 for the first time in four months
The largest cryptocurrency by market capitalization saw prices fall more than 5% to below $40,000 at session lows Monday morning in New York, based on Yahoo Finance data. That marked the first time prices broke below that threshold since September. Prices steadied just below $41,000 as of 10:15 a.m. ET.
Other cryptocurrencies also saw prices sink. Ethereum, the second-largest cryptocurrency by market cap, dropped more than 3% to dip below $3,000.
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9:30 a.m. ET: Stocks open lower
Here's where markets were trading just after the opening bell Monday morning:
"We started the holiday season in a strong position but have since experienced several consequences of the Omicron variant, including increased capacity constraints, more limited staff availability, and reduced operating hours in certain locations," Lululemon CEO Calvin McDonald said in a press statement Monday.
The company expects fourth-quarter net revenue "to be toward the low end of its range of $2.125 billion to $2.165 billion, and that it expects diluted earnings per share and adjusted diluted earnings per share to be toward the low end of its ranges of $3.24 to $3.31 and $3.25 to $3.32, respectively."
Shares fell about 7% in early trading. The stocks has declined by more than 9% for 2022-to-date through Friday's close.
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7:40 a.m. ET Monday: Stock futures head for mixed open
Here's where markets were trading ahead of the opening bell Monday morning:
S&P 500 futures (ES=F): -13.5 points (-0.29%), to 4,654.25
Dow futures (YM=F): -41 points (-0.11%), to 36,066.00
Nasdaq futures (NQ=F): -97.5 points (-0.63%) to 15,483.50
NEW YORK, NEW YORK - JANUARY 07: Traders work on the floor of the New York Stock Exchange (NYSE) on January 07, 2022 in New York City. Markets fell slightly in morning trading as investors reacted to a government jobs report showing that the U.S. economy added far fewer jobs than expected in December. (Photo by Spencer Platt/Getty Images) ·Spencer Platt via Getty Images
