Stocks fall as technology retreats, while oil reaches a seven-year high
On Wall Street on Monday, technology companies led a broad stock market decline as rising bond yields and energy prices fueled investor concerns about higher inflation.
The S&P 500 was down 1.3 percent, the Dow Jones Industrial Average was down 0.9 percent, and the tech-heavy Nasdaq was down 2.1 percent.
Oil prices hit a seven-year high as OPEC and other oil producers stuck to a plan to gradually increase output even as global demand for crude oil rises.
Treasury yields, which had risen sharply the previous week, have risen again. The recent surge has contributed to the decline in technology stocks. Apple fell 2.5 percent, while Microsoft fell 2.1 percent.
Large communication firms also suffered losses. Facebook fell 4.9 percent the next day after a former employee told “60 Minutes” that the company has consistently put its own interests ahead of the public good. The social network, as well as its Instagram and WhatsApp platforms, experienced a worldwide outage that began around midday on Monday.
“What you’re seeing today is those areas — the expensive, growth technology type of areas — that had led over the past few months as interest rates remained low are now reversing as you’re seeing interest rates move higher,” said Megan Horneman, director of portfolio strategy at Verdence Capital Advisors.
The S&P 500 dropped 56.58 points to 4,300.46. The drop comes after the benchmark index’s worst week since winter and a 4.8 percent drop in September, the S&P 500’s first monthly loss since January.
Dow Jones Industrial Average fell 323.54 points to 34,002.92. The Nasdaq has dropped 311.21 points to 14,255.48.
Crude oil prices in the United States rose 2.3 percent and surpassed $77 per barrel for the first time since 2014. OPEC and its allies decided on Monday to maintain their cautious approach to restoring oil production that had been cut during the pandemic, agreeing to add 400,000 barrels per day in November.
Natural gas prices increased by 2.6 percent. Energy companies have risen in tandem with energy prices. Devon Energy gained 5.3 percent, the most in the S&P 500. Marathon Oil increased by 4.1 percent. The 10-year Treasury yield increased to 1.49 percent from 1.47 percent on Friday. On September 20, the yield was 1.31 percent. The rapid rise in interest rates has forced a rethinking of whether stocks, particularly already expensive technology companies, have become overpriced.
Investors are becoming increasingly concerned about inflation as oil prices rise and businesses continue to face supply issues that raise their costs and force them to raise prices. Wall Street is also concerned about the timing of the Federal Reserve’s reduction in bond purchases and its eventual move to raise its benchmark interest rate. You really have a lot of reasons for the tape to trade defensively right now,” said Julian Emanuel, BTIG’s chief equity and derivatives strategist. “If you’re not going to get the bond market rallying and yields declining, then the likelihood is you see more volatility in stocks,” he said. he said.
Investors are also gearing up for the latest round of corporate earnings, which will begin in the coming weeks. They are also closely monitoring economic data for additional clues about the pace of recovery as businesses and consumers deal with the effects of COVID-19 and the highly contagious delta variant.
This week, Wall Street will learn more about the state of the economy. The Institute for Supply Management will release its September service sector index on Tuesday. The services sector accounts for the majority of the economy, and its health is critical to growth.
The Labor Department will release its September employment report on Friday. The labour market has been struggling to fully recover from the effects of COVID-19, which occurred more than a year ago.
Tesla’s stock remained slightly higher after the electric vehicle manufacturer reported surprisingly strong third-quarter deliveries. The stock increased by 0.8 percent after rising by 4 percent in the first half.
In Asia, Hong Kong’s benchmark dropped more than 2% after shares in troubled property developer China Evergrande were suspended from trading. The majority of European markets’ stocks rose marginally.