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Nasdaq slumps into correction territory after painful start to 2022

The technology-focused Nasdaq Composite fell temporarily into the correction zone on Monday, down more than 10% from its all-time high in November.

The index, which includes tech giants such as Apple and Google’s parent Alphabet, fell 2.7% on Monday and then regained some of its 0.8% drop by mid-afternoon in New York.

Analysts usually believe that the market has fallen 10 percent from recent highs to indicate a correction. Last week’s decline followed a 4.5% decline.

The sale was driven by a surge in US Treasury yields as investors dumped debt in anticipation of tighter policies from the Federal Reserve. Benchmark 10-year bond yields have risen to 1.78% for seven consecutive days, the largest increase since the coronavirus pandemic shook the US financial markets in March 2020. This year started at about 1.5%.

Solita Marchelli, Chief Investment Officer of UBS Global Wealth Management in the Americas, said:

The decline in tech stocks was more severe than in the broader US stock market, with the benchmark S & P 500 down 0.7%. The European market also fell on Monday, with the Stocks Europe 600 down 1.5%.

The Federal Reserve is considering raising interest rates several times this year from the historic lows set during the coronavirus crisis almost two years ago. Policy makers must take a more aggressive stance to get rid of the stimulus, consumer prices have risen in the fastest annual clip since 1982, and the labor market is showing strong signs of recovery.

The change in mood has hurt the share of tech companies that have benefited from the blockade of other industries struggling, with investors praising the high and rising reputation of small groups of large companies that thrived during the pandemic. Boosted by low interest rates that help justify.

The Goldman Sachs index, which tracks the share of tech companies that are losing money, has fallen by more than a tenth since the beginning of the year.

Treberg Leesam, Head of Multi-Assets at Royal London Asset Management, said:

The latest US inflation data is scheduled for Wednesday. Economists surveyed by Refinitiv expect US consumer prices to rise from 6.8% in November to an annual rate of 7% last month.

The unemployment rate in the United States dropped to an unexpectedly low 3.9% in December, according to a report on the number of non-farm payrolls in the labor sector last week. This was minutes after the Fed’s latest meeting, and days after central bank officials showed that they had talked about raising interest rates “faster or at a faster pace” than previously expected.

Goldman Sachs economists expect to raise interest rates four times this year after the Fed brings interest rates close to zero in a move that lowered corporate funding costs and pushed up global equities in March 2020. ..

“Hikes continued in March, June and September, with a total of four additional hikes in December 2022,” Goldman’s Jan Hatzius said in a note to the customer.

“The declining labor market downturn has made Fed officials more sensitive to upward inflation risk and less sensitive to downward growth risk.”

The dollar index, which measures the US currency, rose 0.3 percent against the other six. In cryptocurrencies, the price of Bitcoin temporarily fell below $ 40,000 on Monday for the first time since September 2021.

Additional report by Nicholas Megaw

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