(Bloomberg) — As the Federal Reserve gets ready to unwind its crisis-era stimulus, prompting a recalibration of bond yields, technology companies continue to bear the brunt of the stock-market selloff.
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A two-day rout for the industry that has led the surge in equities from the depths of the pandemic is putting the tech-heavy Nasdaq 100 on pace for its worst month in one year. The gauge of behemoths like Apple Inc. and Amazon.com Inc. slumped again on Tuesday, underperforming companies that will likely benefit the most from an economic revival. Meantime, Treasury 10-year rates topped 1.5%.
Despite the drumbeat of bubble warnings of the past few months, tech continued to push higher, reaching valuation levels not seen in nearly two decades. However, the recent spike in bond yields made the premium investors pay to hold high-growth companies like tech less attractive. That could be a sign traders see an economic recovery overcoming fears of new Covid variants and supply-chain issues.
Investors have showed reduced appetite for U.S. debt since the Fed signaled last week that tapering may begin in November. Fed Chair Jerome Powell will appear in the Senate alongside Treasury Secretary Janet Yellen. In his prepared remarks, Powell said that he expects inflation pressure to remain high in the coming months before easing. U.S. homes prices surged 19.7% in July — once again posting the biggest jump in more than 30 years.
Yellen warned that her department will effectively run out of cash around Oct. 18 unless legislative action is taken to suspend or increase the federal debt limit, putting pressure on lawmakers to avert a default on U.S. obligations.
Read: Lagarde Warns Against Overreacting to Transitory Inflation Shock
Elsewhere, Brent oil traded near $80 a barrel — the latest milestone in a global energy crisis — on signs that demand is running ahead of supply and depleting inventories. The surge is adding inflationary pressures to the economy at a time when prices of energy commodities are soaring. European natural gas, carbon permits and power rose to fresh records Tuesday.
Here are some events to watch this week:
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Japan’s ruling party votes to elect leader, Wednesday
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Central bank chiefs Andrew Bailey (BOE), Haruhiko Kuroda (BOJ), Christine Lagarde (ECB) and Jerome Powell (Fed) participate in an ECB Forum panel, Wednesday
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House Financial Services Committee hearing on the Fed, Treasury’s pandemic response, Thursday
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China Caixin manufacturing PMI, non-manufacturing PMI, Thursday
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Univ. of Michigan sentiment, ISM manufacturing, U.S. construction spending, spending/personal income, Friday
For more market analysis, read our MLIV blog.
Some of the main moves in markets:
Stocks
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The S&P 500 fell 0.9% as of 9:46 a.m. New York time
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The Nasdaq 100 fell 1.7%
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The Dow Jones Industrial Average fell 0.4%
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The Stoxx Europe 600 fell 1.7%
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The MSCI World index fell 1.1%
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The Russell 2000 Index fell 0.8%
Currencies
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The Bloomberg Dollar Spot Index rose 0.5%
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The euro fell 0.2% to $1.1674
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The British pound fell 1.2% to $1.3536
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The Japanese yen fell 0.5% to 111.57 per dollar
Bonds
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The yield on 10-year Treasuries advanced seven basis points to 1.56%
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Germany’s 10-year yield advanced five basis points to -0.18%
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Britain’s 10-year yield advanced nine basis points to 1.04%
Commodities
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West Texas Intermediate crude rose 1.1% to $76.26 a barrel
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Gold futures fell 1.1% to $1,732.40 an ounce
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