S&P 500 and Nasdaq are down on Fed rate hikes

S&P 500 and Nasdaq are down on Fed rate hikes

Goldman Sachs expects that the Fed will hike rates four times in 2022.

Tesla has a price hike plan for driver assistant software.

On Monday, Wall Street's main indexes fell as heavyweight technology stocks fell on expectations of a sooner than expected rate hike that pushed U.S Treasury yields to new two-year highs.

The Nasdaq fell as much as 10.37% below its intraday record level reached on November 22. It was trading about 9% less than its Nov. 19 closing record. If a correction is made, the index would need to close 10% or more below the record close.

Megacap companies, including Apple, Amazon.com Inc., Microsoft Corp. and Meta Platforms Inc., fell between 2.1% and 4.4%.

The S&P 500 consumer discretionary, technology and communication services sectors, housing major growth companies, fell the most among the 11 major S&P sectors.

Randy Frederick, managing director of trading and derivatives at Charles Schwab in Austin, Texas, said that big tech companies should do fine because rising rates don't really affect them too much.

They are getting dragged down by the fact that people are selling the unprofitable, heavily leveraged, heavily indebted newer tech companies that have gone public recently, particularly the ones that were SPACs special purpose acquistion companies, such as BuzzFeed and Grab Holdings, which have lost half of their market capitalization since their public debut in December through a SPAC.

Frederick expects the tech selloff to go on until the next Fed meeting, which is around January 26. The S&P 500 and the Nasdaq indexes fell for the fifth day in a row of declines as investors began to re-calibrate their portfolios to account for a more hawkish Federal Reserve.

Goldman Sachs expects the Fed to raise rates four times in 2022, compared to its previous forecast of three.

After the December meeting of the Fed suggested an earlier than expected rate rise, traders have increased their rate hike expectations this year.

The benchmark 10 year Treasury yield rose to its highest level in nearly two years, boosting the value-oriented banks index to a new record high.

Tesla dropped 1.8% after Chief Executive Elon Musk said on Friday that the electric carmaker will raise the U.S. price of its advanced driver assistant software.

Microsoft fell 2.5% after a media report said the software company has been losing its augmented reality talent to rivals like Meta Platforms.

Investors are hoping that inflation data this week will give clues on consumer and producer prices and whether they will sway the trajectory of the Fed's interest rate hikes.

The Dow Jones Industrial Average was down 457.01 points, or 1.26%, at 35,774 at the Dow Jones Industrial Average. The S&P 500 was down by 76.38 points, or 1.63%, at 4,600, at 65, the S&P 500 was down 76.38 points, or 1.63%. The Nasdaq Composite was down 329.15 points, or 2.20%, at 14,606. Nike was down 5.1% after HSBC downgraded the stock to hold Declining issues out of the way of the advancers for a 4.18 to 1 ratio on the NYSE and a 3.89 to 1 ratio on the Nasdaq.

The S&P index recorded 37 new 52 week highs and five new lows, while the Nasdaq recorded 58 new highs and 573 new lows.