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* Goldman shares drop as profit hit by weaker trading
* Benchmark U.S. Treasury yields jump to two-year highs
* Activision soars on $68.7 billion Microsoft deal
(Updates with close of U.S. market)
Jan 18 (Reuters) - Wall Street's main indexes fell sharply
on Tuesday as weak results from Goldman Sachs weighed on
financial stocks and tech shares continued their sell-off to
start the year as U.S. Treasury yields rose to milestones.
Goldman Sachs https://www.reuters.com/business/finance/goldman-sachs-profit-misses-estimates-weak-equity-trading-2022-01-18
shares tumbled after the investment bank missed
quarterly profit expectations amid weak trading activity. The
financials sector, which has been one of the
better-performing groups in 2022, slumped.
The financials crumbling a little bit under the weight of
less-than-impressive earnings quarters is probably the biggest
factor today, said Chuck Carlson, chief executive officer at
Horizon Investment Services in Hammond, Indiana. When you have
taken out potentially one of the areas that actually was working
here, that kind of casts a pall on the market.
Benchmark U.S. Treasury yields jumped to two-year highs and
two-year yields breached 1% as traders prepared for the Federal
Reserve to be more aggressive in tackling unabated inflation.
The steep ascent in yields to start 2022 has weighed in
particular on tech and growth stocks, whose future expected cash
flows are discounted more sharply as yields rise.
The hot inflation prints have spooked the market that the
Fed is going to move and so we are seeing this rise in yields,
said Mona Mahajan, senior investment strategist at Edward Jones.
"Its not only the rise in yields but the rapid rise in
yields ... that really does cause some indigestion in the
market, but particularly in growth, higher valuation, more
speculative asset classes, Mahajan said.
According to preliminary data, the S&P 500 lost 83.85
points, or 1.80%, to end at 4,579.00 points, while the Nasdaq
Composite lost 379.05 points, or 2.54%, to 14,514.71.
The Dow Jones Industrial Average fell 533.17 points, or
1.48%, to 35,383.30.
A BofA survey showed that fund managers had cut their
overweight positions in tech to their lowest levels since 2008,
while another survey by Deutsche Bank found that a majority of
respondents believed U.S. technology stocks are in bubble
territory.
Investors are zeroing in on next week's Fed policy meeting
for more clarity on central bankers' next moves to rein in
inflation. Data last week showed U.S. consumer prices increased
solidly in December, culminating in the largest annual rise in
inflation in nearly four decades.
In company news, Activision shares soared after
Microsoft announced a deal to buy the video-game maker
for $68.7 billion.
(Reporting by Bansari Mayur Kamdar, Shreyashi Sanyal, Sruthi
Shankar in Bengaluru, Sinéad Carew and Karen Brettell in New
York and Danilo Masoni in Milan; Editing by Maju Samuel and Lisa
Shumaker)