U.S. stocks fell on Monday, extending a rocky start to 2022 for equity markets as interest rates rise.
The Dow Jones Industrial Average dropped 300 points, or 0.8%. The S&P 500 shed 0.9% and the Nasdaq Composite slid 1.2%. The S&P 500 and Nasdaq Composite are coming off four straight days of losses, while the Dow has retreated in three consecutive sessions.
The rough start to the year for stocks has come as interest rates have spiked. The benchmark 10-year Treasury yield briefly traded above 1.8% on Monday morning after ending the year near 1.51%. On Sunday, Goldman Sachs projected the Federal Reserve to hike rates four times in 2022, signaling that Wall Street increasingly expects the central bank to get aggressive in an attempt to curb inflation.
Large tech stocks were under pressure in early trading, with shares of Facebook-parent Meta and chipmaker Nvidia falling more than 4% and Amazon dropping 3%. Shares of video game publisher Take-Two fell more than 13% after the company announced a deal to purchase Zynga.
The sell-off was broader than just Big Tech, however, with roughly 70% of S&P 500 stocks declining.
“Stocks are getting pulverized as tech extends its slump, but investors are forgetting to rotate, and the cyclical/value community is getting hit too as a result. It’s hard to blame any incremental news, and instead the same themes and trends as the last few weeks continue to weigh heavily on sentiment, specifically the withdrawal of stimulus and the effect this will have on equity multiples,” Adam Crisafulli of Vital Knowledge said in a note to clients.
The Nasdaq is now down more than 6% for the year and at one point on Monday was more than 10% below its intraday record high from November. High-growth stocks in particular have struggled as interest rates jumped, driving stocks and bonds down at the same time.
Stocks came off their lows in afternoon trading and the 10-year Treasury yield dipped back below 1.8%.
JPMorgan CEO Jamie Dimon said that he expected strong growth this year even though he saw the Fed raising rates more than four times over the course of the year.
“We’re going to have the best growth we’ve ever had this year, I think, since maybe sometime after the Great Depression,” Dimon told CNBC’s Bertha Coombs during the 40th Annual J.P. Morgan Healthcare Conference.
“The market can have its own fluctuations unrelated to the economy, and I think you need this kind of growth to justify the market. We’re kind of expecting that the volatility will have a lot of volatility this year as rates go up,” Dimon added.
Investors readied for a big week that will include key inflation data as well as a confirmation hearing for Federal Reserve Chairman Jerome Powell. Earnings season also kicks off this week. The S&P 500 is expected to show a growth rate of 21.7%, which would be the fourth straight quarter above 20%, according to FactSet.
The consumer price index is set for release Wednesday and is expected to show a year-over-year increase of 7.1%, according to Dow Jones estimates. The producer price index, which measures wholesale prices, is slated for Thursday.
Powell is scheduled to testify Tuesday at his nomination hearing before a Senate panel, while the hearing on Fed Governor Lael Brainard’s nomination to the post of vice chair is set for Thursday. While both are expected to be confirmed, the hearings could provide key information about the future of monetary policy.
Financial heavyweights JPMorgan Chase, Citigroup and Wells Fargo release quarterly results Friday.
The three major stock averages all fell in the first week of the year. The S&P 500 slid 1.9% last week and the Nasdaq Composite dropped 4.5%. The Dow outperformed, fading just 0.3%.
