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* Goldman shares drop 7% as profit hit by weaker trading
* Benchmark U.S. Treasury yields jump to two-year highs
* Activision soars on $68.7 billion Microsoft deal
* Indexes down: Dow 1.45%, S&P 1.73%, Nasdaq 2.24%
(Updates with mid-afternoon trading)
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 fell 7.3% after the investment bank missed
quarterly profit expectations amid weak trading activity.
Financials were the biggest-declining S&P 500 sector,
falling 2.4%.
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.
The Dow Jones Industrial Average fell 520.39 points,
or 1.45%, to 35,391.42, the S&P 500 lost 80.55 points, or
1.73%, to 4,582.3 and the Nasdaq Composite dropped
334.31 points, or 2.24%, to 14,559.44.
All 11 major S&P 500 sectors were trading lower with the
heavyweight tech sector down 2.1%.
Declines in megacap stocks, including Microsoft,
Apple and Amazon, weighed most on the S&P 500
among individual shares.
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.
The Nasdaq fell as much as 9.5% below its Nov. 19 closing
record. To confirm a correction the index would need to close
10% or more below the record close.
"We're having a repricing going on as the market prepares
for interest rate hikes and we still have a bit of a ways to go
to prepare for three rate hikes or four rate hikes," Michael
ORourke, chief market strategist at JonesTrading. "We haven't
priced that in."
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 jumped 25% after
Microsoft announced a deal to buy the video-game maker
for $68.7 billion. Shares of other video game companies rose,
with Electronic Arts up 4.5% and Take-Two Interactive
Software up 2.2%. Microsoft shares fell 2%.
Declining issues outnumbered advancing ones on the NYSE by a
6.32-to-1 ratio; on Nasdaq, a 4.90-to-1 ratio favored decliners.
The S&P 500 posted 32 new 52-week highs and eight new lows;
the Nasdaq Composite recorded 63 new highs and 534 new lows.
(Reporting by Bansari Mayur Kamdar, Shreyashi Sanyal, Sruthi
Shankar in Bengaluru, Sinéad Carew in New York and Danilo Masoni
in Milan; Editing by Maju Samuel and Lisa Shumaker)