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U.S. technology stocks fell on Monday as investors prepared for new signs that inflationary pressures are rising in the world’s largest economy.
The S&P 500 blue-chip closed 1% lower, while the technology-focused Nasdaq Composite achieved a two-day winning streak to slide 2.6%.
U.S. government bonds joined the sale, resulting in longer yields. The reference 10-year treasury note traded at 1.6 percent, an increase of approximately 0.03 percentage points on the day.
Analysts expect Wednesday’s data to show that major U.S. prices rose 3.6% in April from the same period last year. Chinese factory prices, an early indicator of price pressures for importers in the west, are expected to have jumped more than 6% in a report released on Tuesday.
Data released Monday by the U.S. central bank’s New York central bank underscored that consumers were also preparing for higher prices. According to a recent survey, average inflation expectations for next year bordered to 3.4% in April, the highest level since September 2013.
Market measures of inflation expectations have also increased. A popular indicator, the five-year rate of return, reached its highest point in about 15 years on Monday, above 2.7%.
The Fed has done that committed stay relaxed on inflation above its 2% target while the US economy is cured of the pandemic. The central bank has indicated that it has no plans to reduce its $ 120 billion a month bond purchases that have kept a cap on Treasury yields, which are influencing borrowing costs worldwide.
But analysts remain concerned about the possibility that for several months strong inflation will reach bond prices and, as a result, yields rise. Rising bond yields to depress equity valuations, especially long-term growth stocks in the technology sector that do not pay generous dividends.
“Will inflation lead to a bearish bond market and a sale of technology? That’s the key market narrative right now, ”said Gregory Perdon, co-investment director at Arbuthnot Latham.
“The Fed can say that inflation is transitory as long as the economies reopen. . . This line is starting to become obsolete when major economies like the US reopen completely and we still have an inflationary momentum. ”
“One of the ideas is that the reflection will be orderly and benign,” said Yuko Takano, portfolio manager at Newton Investment Management, while “you have another field that sees U.S. inflation reaching 4 or 5 percent. , which could be very messy for markets.
Technology stocks have also been pandemic winners that some analysts suspect will be difficult to maintain their current levels of revenue growth as blockages are eased.
The Nasdaq reunited to the maximum last month as larger companies reported strong first quarter results. On Monday, Citigroup downgraded its rating on Facebook and shares of Google’s parent alphabet to neutral, saying “growth is likely to slow” from the second quarter of this year. Shares of Facebook fell 4.1% on Monday and those of Alphabet were 2.6% lower.
“Another cloud over the technology sector is U.S. tax reform,” said Marco Pirondini, U.S. head of equities at Amundi. The President of the United States, Joe Biden, is pushing to obtain a global minimum corporate tax rate that stops multinationals from channeling profits through low-tax jurisdictions threat the business models of the world’s largest technology companies.
The dollar index, which measures the U.S. currency against the currencies of a group of trading partners, fell 0.1%. The index has fallen 0.8 percent since a report Friday showed the U.S. created one much weaker of which 266,000 new jobs were expected in April.
The pound rose 1% to $ 1.41, following the UK Conservative Party’s victories in local elections and the expected announcement of more coronavirus restrictions. get up from 17 May.
China’s renminbi, which is led by the country’s central bank, hit a three-year high of $ 6.41 per dollar.
Elsewhere, futures on Brent crude were hovering around $ 68.23 a barrel. The European Stoxx 600 index ended the session up 0.1%.
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