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Jan. 18, 2022, 4:58 p.m. EST

Dow ends more than 500 points lower as stocks sink amid rising Treasury yields and a Goldman earnings miss

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By Christine Idzelis and William Watts

All three major U.S. stock benchmarks closed sharply lower Tuesday, with losses led by the technology-laden Nasdaq Composite Index, as the high-growth tech sector fell under pressure from climbing Treasury yields and investors began digesting a busy week for company earnings.

A blockbuster tech deal was also in the spotlight, after Microsoft Corp. /zigman2/quotes/207732364/composite MSFT +1.12% said it had reached an agreement to acquire Activision Blizzard Inc.  /zigman2/quotes/200717283/composite ATVI +0.88% in an all-cash deal valued at $68.7 billion .

What did stock indexes do?

  • The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.60% dropped 543.34 points, or 1.5%, to close at 35,368.47.

  • The S&P 500 /zigman2/quotes/210599714/realtime SPX +0.95% declined 85.74 points, or 1.8%, to end at 4,577.11.

  • The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +1.51% sank 386.86 points, or 2.6%, to finish at 14,506.90, below its 200-day moving average.

Read: Here’s what history says about the Nasdaq Composite’s near-term returns after its first close below its 200-day moving average

What drove markets?

Stocks dropped sharply as Treasury yields rose in anticipation of the Federal Reserve tightening monetary policy this year.

“We’re looking at a year of a totally different monetary environment,” said Sam Solem, portfolio manager for Intrepid Private Wealth, in a phone interview Tuesday. “Everyone is trying to digest what three to four Fed rate hikes look like this year.”

The yield on the 10-year Treasury note /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y -0.0036% rose 9.5 basis points Tuesday to 1.866%, the highest in about two years based on trading levels at 3 p.m. Eastern Time, according to Dow Jones Market Data. The yield on the 2-year Treasury note /zigman2/quotes/211347045/realtime BX:TMUBMUSD02Y +0.16% , which is more sensitive to Fed policy expectations, shot up 7.3 basis points to 1.038% to reach the highest level since late February 2020.

Yield-sensitive tech and other growth stocks were weighing on the Nasdaq, but “it is not all doom and gloom out there, because M&A activity is going well, and the ongoing vaccination efforts by Western governments means the soft patch in U.S. and global data could be short-lived,” said Fawad Razaqzada, analyst at ThinkMarkets, in a note.

Information technology had the steepest decline among the S&P 500 index’s sectors Tuesday, according to FactSet data. Tech fell 2.5%, while the financial sector ended with the second biggest loss with a 2.3% slide.

Goldman Sachs Group Inc. /zigman2/quotes/209237603/composite GS +0.30% on Tuesday said its fourth-quarter profit fell 13%, missing Wall Street estimates, in a choppy quarter for the Wall Street firm. Shares of Goldman closed about 7% lower, leading losses for the Dow.

In U.S. economic data, the New York Fed’s Empire State index of business conditions nosedived to -0.7 in January from 31.9 in the prior month, reflecting fresh strains from the omicron virus and ongoing supply-chain bottlenecks.

That’s a “big miss,” said Solem, and a “sign that growth is slowing.”

Crude-oil prices CL00 , meanwhile, traded at their highest level since 2014 amid unrest in the Middle East after Houthi rebels in Yemen launched a drone attack on a key oil facility in Abu Dhabi. The United Arab Emirates is OPEC’s third-largest producer.

/zigman2/quotes/207732364/composite
US : U.S.: Nasdaq
$ 262.52
+2.90 +1.12%
Volume: 28.55M
May 25, 2022 4:00p
P/E Ratio
27.39
Dividend Yield
0.94%
Market Cap
$1941.71 billion
Rev. per Employee
$1.06M
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/zigman2/quotes/200717283/composite
US : U.S.: Nasdaq
$ 77.71
+0.68 +0.88%
Volume: 3.47M
May 25, 2022 4:00p
P/E Ratio
24.60
Dividend Yield
0.60%
Market Cap
$60.23 billion
Rev. per Employee
$846,633
loading...
/zigman2/quotes/210598065/realtime
US : Dow Jones Global
32,120.28
+191.66 +0.60%
Volume: 348.46M
May 25, 2022 5:35p
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
3,978.73
+37.25 +0.95%
Volume: 2.33B
May 25, 2022 5:35p
loading...
/zigman2/quotes/210598365/realtime
US : Nasdaq
11,434.74
+170.29 +1.51%
Volume: 3.88M
May 25, 2022 5:16p
loading...
/zigman2/quotes/211347051/realtime
add Add to watchlist BX:TMUBMUSD10Y
BX : Tullett Prebon
2.75
-0.0001 -0.0036%
Volume: 0.00
May 26, 2022 1:27a
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/zigman2/quotes/211347045/realtime
add Add to watchlist BX:TMUBMUSD02Y
BX : Tullett Prebon
2.50
+0.0040 +0.16%
Volume: 0.00
May 26, 2022 1:24a
loading...
/zigman2/quotes/209237603/composite
US : U.S.: NYSE
$ 314.90
+0.95 +0.30%
Volume: 1.93M
May 25, 2022 4:00p
P/E Ratio
6.11
Dividend Yield
2.54%
Market Cap
$107.83 billion
Rev. per Employee
$1.40M
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