Tech Turbulence Tugs S&P 500 Below 5,100 Amid Rising Rate Concerns

📝 SUMMARY: In a tumultuous trading session, the S&P 500 ($.INX) plunged below 5,100, marking its lowest point in nearly two months, primarily driven by a significant downturn in tech megacaps such as Microsoft Corp. ($MSFT), Apple Inc. ($AAPL), and Nvidia Corp. ($NVDA). These declines came as bond yields spiked—ten-year Treasury yields rose nine basis points to 4.62%—following stronger-than-expected retail sales data, which dampened hopes for an imminent Federal Reserve rate cut.

The tech-heavy Nasdaq 100 was also adversely affected, dropping over 1.5% as both indices breached their 50-day moving averages, a traditional bearish indicator. Despite these tech losses, sectors like banking outperformed, buoyed by an unexpected profit surge from Goldman Sachs Group Inc. ($GS).

Oil prices experienced volatility, briefly dipping below $85 but later recovering, amid escalating tensions in the Middle East that also pushed gold prices higher. These fluctuations reflect the broader market's sensitivity to geopolitical risks and economic indicators.

The optimistic retail sales report for March, which exceeded expectations and saw a revision upwards for the previous month, suggests a persistent robustness in consumer spending. This economic strength, however, raises concerns about entrenched inflation and the likelihood that the Federal Reserve will maintain higher interest rates longer than previously anticipated.

With the Fed potentially postponing rate cuts until more definitive signs of inflation cooling appear, market sentiment has shifted. Investors now seem to brace for a "higher for longer" rate scenario, affecting sectors sensitive to interest rate changes, like technology.

Despite these challenges, historical data suggests that market corrections are often short-lived, with the S&P 500 typically rebounding within months. The current economic backdrop of strong consumer demand and steady growth may still support the equity markets, but the path forward appears fraught with potential rate-induced volatility and geopolitical uncertainties.

🔍 SOURCE: https://www.bloomberg.com/news/articles/2024-04-14/asian-stocks-set-to-fall-in-wake-of-iran-attack-markets-wrap?srnd=markets-vp