The Nasdaq falls to its lowest level in 2 years on Monday, led by a drop in chip stocks
Stocks fell on Monday, with the Nasdaq Composite Index falling to its lowest level in two years as tech stocks continued to be the hardest hit in this bear market due to soaring interest rates.
The Nasdaq Composite fell more than 1.3% to hit its lowest levels since September 2020, weighed down by a slump in semiconductor stocks such as Nvidia and AMD. The S&P 500 also fell, led by semi-stocks and declines in big tech names Apple and Microsoft. The benchmark lost about 0.78%.
The Dow Jones Industrial Average fell 77 points, buoyed somewhat by gains from Merck and McDonalds.
The tumble in semiconductor stocks comes after the Biden administration announced new export controls that limit U.S. companies selling advanced computer semiconductors and related manufacturing equipment to China. Tech stocks have also been the hardest hit by this selloff, as rising rates expose their relatively high valuations and raise their cost of capital.
While the bond market is closed, 10-year Treasury futures were down on Monday, indicating yields will continue to rise on Tuesday. Yields move inversely to prices. The price of 10-year Treasury futures fell about 0.6%.
Investors were also cautious ahead of major earnings and inflation reports this week, which will shed new light on the US economy. Four of the largest banks in the world – JP Morgan, Wells Fargo, Morgan Stanley and Town – report Friday. PepsiCo, Delta and Dominoes are also among the companies reporting next week.
Along with inflation, rising interest rates and a slowing economy, the strength of the US dollar could play a big role in earnings.
“We may hear more in the coming weeks about the pressures an exceptionally strong dollar can have on U.S. exports and therefore on U.S. corporate earnings, but the strength of the dollar could also play a role in bringing the Fed to “back off” from its tightening policy,” wrote Chris Larkin, managing director of trading at Morgan Stanley’s E*Trade in a Monday note.
The new monthly Producer Price Index data arrives on Wednesday and the Consumer Price Index data arrives on Thursday.
The Nasdaq’s losses for the year are now over 32% after Monday’s decline. The S&P 500 is down 24% in 2022.