(Bloomberg) — Tech shares led a rout in U.S. stocks while the selloff in global bonds deepened, with the benchmark Treasury yield hitting a one-year high and debt from the U.K. to Australia coming under pressure.
The Nasdaq 100 fell about 3%, heading for the biggest drop since October, as investors rotate away from pandemic-era winners toward companies poised to benefit from an end to lockdowns. Ten stocks fell for every one that gained on the S&P 500. Cathie Wood’s ARK Innovation ETF extended its decline, leaving it 15% lower for the week. Stocks popular with the day-trader crowd surged once again, with GameStop Corp. up as much as 85%. European shares slumped.
Ten-year Treasury yields spiked after tepid demand at an auction for government bonds, adding as much as 23 basis points to 1.6%, the highest since last February.
Across markets, investors are betting on a sunnier outlook for the global economy, with U.S. jobless claims data the latest to support that idea. But some traders worry that resurgent growth is already priced into stocks, and they’re staring down the risk that accelerating inflation is just around the corner, a development that would dent the appeal of equities.
“Interest rates are rising for good reasons right now and it’s because markets and the bond market are expecting us to return to good growth,” said Chris Gaffney, president of world markets at TIAA Bank. “The problem comes in when interest rates start rising for bad reasons — and a bad reason would be that they expect inflation to start getting out of hand.”
In remarks this week, Federal Reserve Chairman Jerome Powell offered reassurance that policy would continue to be supportive and look beyond a temporary pick-up in inflation, especially from a low base.
That’s given the bond market enough reason to keep driving yields higher. The 10-year U.S. yield adjusted for inflation rose to its highest level in more than seven months, a warning sign for riskier assets that have benefited from exceptionally loose financial conditions amid the pandemic.
Read more: Soaring U.S. Yields Send Risk Assets Warning as Real Rates Rise
Elsewhere in markets, Asian bourses closed broadly higher. Bitcoin traded just below $50,000.
Some key events to watch this week:
Finance ministers and central bankers from the Group of 20 will meet virtually Friday. U.S. Treasury Secretary Janet Yellen will be among the attendees.
These are some of the main moves in markets:
The S&P 500 Index fell 2.1% as of 1:16 p.m. New York time.The Stoxx Europe 600 Index fell 0.4%.The MSCI Asia Pacific Index surged 0.9%.The MSCI Emerging Market Index added 0.3%.
The Bloomberg Dollar Spot Index rose 0.5%.The euro climbed 0.5% to $1.2226.The British pound fell 0.5% to $1.4067.The Japanese yen weakened 0.4% to 106.27 per dollar.
The yield on 10-year Treasuries increased 15 basis points to 1.52%.Germany’s 10-year yield jumped seven basis points to -0.23%.Britain’s 10-year yield increased five basis points to 0.78%.
West Texas Intermediate crude fell 0.1% to $63.19 a barrel.Gold weakened 2.1% to $1,766.47 an ounce.
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