Tech Rout Pulls Stocks From Record; Bonds Fall: Markets Wrap

(Bloomberg) -- U.S. stocks slipped from an all-time high after worries over rising interest rates sparked a selloff in tech shares. Treasuries fell and the yen dropped to the lowest since 2017.

The S&P 500 was little changed Tuesday as data showed mixed signs on U.S. inflation ahead of three expected rate hikes from the Federal Reserve this year. Prices paid by manufacturers in December came in sharply lower than expected, adding to signs inflationary pressure may have peaked in some areas. However, data showing a record U.S. job quit rate added to concerns over wage inflation.

The tech-heavy Nasdaq 100 fell 1.3% with Tesla Inc. shedding 4.2%. Cathie Wood's flagship ARK Innovation ETF plunged 4.4% and a fund tracking newly public companies dropped 4.0%.

The losses came as a rout in U.S. bonds continued Tuesday with the 10-year Treasury yield up two basis points to 1.65% after surging 12 basis points on Monday.

“The 10-year Treasury yield is on fire and that could be weighing on sentiment for growth stocks, especially expensive ones, such as tech and semis,” Mike Bailey, director of research at FBB Capital Partners, said.

Matt Maley, chief market strategist at Miller Tabak + Co, added the slide seemed like a delayed response to the rise in long-term interest rates.

“Yesterday's big bounce in the 10-year yield did not seem to have a definitive catalyst, so some investors thought it might not hold,” he said. “Since the rise is holding today, even extending, stock investors are finally reacting to it.”

Markets anticipate an uptick in volatility as they navigate through the omicron variant, supply-chain disruptions and more central banks winding back pandemic stimulus. More than one million people in the U.S. were diagnosed with Covid-19 on Monday, a new global daily record.

“With bond yields moving higher the market is adjusting tech lower,” Luke Hickmore, investment director at Standard Life Investments said. “Tech is suffering from the long duration nature of these assets -- i.e. it is generally a long time until the current valuation is supported by earnings in a normal multiple.”

Traders expect tightening from the Fed to boost yields and reset equity valuations. Meanwhile, this week's U.S. December payroll data and minutes from the Fed's meeting last month may throw more light on the pace of such a shift.

Bitcoin rose to about $46,200. Gold climbed. The dollar was little changed. And crude oil in New York gained after OPEC+ agreed to revive more oil supplies.

What to watch this week:

FOMC meeting minutes scheduled for release Wednesday
Fed's Bullard discusses the U.S. economy and monetary policy in an event on Thursday
Fed's Daly discusses monetary policy on a panel Friday
ECB's Schnabel speaks on a panel Saturday

For more market analysis, read our MLIV blog.

Some of the main moves in markets: