By Anneken Tappe, CNN Business
Wall Street has had a rocky start to the year: Stocks again finished lower Wednesday and the Nasdaq Composite closed in correction territory, defined as a minimum 10% drop from its high.
For the Nasdaq, that last peak was its record close on November 19.
On Wednesday the tech-heavy index finished down 1.2%, 10.7% below the record.
The other two major indexes also closed in the red, with the S&P 500 falling nearly 1%, and the Dow also ending nearly 1%, or 340 points, lower.
So what is spooking the market?
There’s plenty going on. Bond yields have been rising around that world in anticipation of higher interest rate policies from global central banks. On Tuesday the US 10-year Treasury bond yield rose above 1.8% for the first time since before the pandemic. Even though it retreated a little Wednesday, it was trading at around 1.85% near the time of the stock market close.
Bond yields and prices move inversely to each other.
“Obviously, the move in interest rates is going to remain a focal point, but at least until next Wednesday when Fed Chair Powell will provide an update, the focus should start to shift to corporate earnings,” Michael Reinking, senior market strategist at the New York Stock Exchange, said in a note to clients Wednesday afternoon.
The Federal Reserve began rolling back its pandemic stimulus program late last year and has signaled multiple interest rate hikes are coming in 2022. Investors don’t expect these to start until March.
“Over the last few weeks investors have piled into cyclical sectors,” Reinking said, “but another round of earnings in the financial sector failed to meet lofty expectations which added to the weakness.”
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