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Tech Stocks Tumble Amid Fed Rate Hike Fears
13 Oct
Summary
- Dow Jones rose 0.4%, while S&P 500 and Nasdaq declined.
- Traders priced in a 22% chance of a Federal Reserve rate hike.
- Energy sector outperformed as technology stocks lagged.
The US stock market navigated a volatile session on Monday, marked by mixed performances across major indices. The Dow Jones Industrial Average concluded the day with a gain of 195.60 points, or 0.4%, reaching 51,850.55. However, the S&P 500 saw a slight dip of 4.30 points, closing at 7,807.24, and the Nasdaq composite fell by 120.27 points, ending at 27,245.90.
Market sentiment was influenced by growing expectations of an interest rate hike. CME's FedWatch tool indicated that traders were pricing in an almost 22% chance of the US Federal Reserve increasing rates this month, a notable increase from Friday's 17.7%.
Sector performance varied significantly. Energy stocks led the gains, rising 1.5% amid increasing oil prices, with Chevron adding 1.4%. Conversely, the technology sector was the primary laggard, shedding 0.9%, with chip stocks heavily impacted. The Philadelphia semiconductor index declined 2.7%, reaching a three-week low. Major tech companies like Micron Technology and Advanced Micro Devices saw notable drops.
In other market movements, Microsoft's market capitalization briefly surpassed $4 trillion for the first time in a year following an announcement about its AI chip deployments. Salesforce shares rose 2% after a significant upgrade from BofA Global Research, and eBay gained 2% following an addition to Morgan Stanley's top-pick list.
US Treasury yields, influenced by inflation and rate hike expectations, have been trending higher. The 10-year Treasury yield, a key indicator for mortgage rates, had recently reached its highest point since 2002, standing at 5.24% late on Friday. U.S. bond trading was closed on Monday due to the Columbus Day holiday.
Looking ahead, financial results from major banks are scheduled for release this week. Citigroup, JPMorgan Chase, and Wells Fargo are set to report on Tuesday, with Bank of America following on Wednesday. These institutions have consistently reported record profits, and expectations remain high for the current quarter.
