Tech Tumble, Lackluster GS Earnings Set to Weigh on Wall Street

Wall Street’s main indexes were set to open lower on Tuesday as technology stocks were slammed by rising Treasury yields, while Goldman Sachs led declines among big banks after posting its quarterly profit below expectations.

Two-year Treasury yields, which track short-term rate expectations, crossed 1 percent for the first time since February 2020 amid traders positioning for a more hawkish Federal Reserve ahead of a policy meeting next week. [US]

Megacap firms including Google’s Alphabet, Apple, Meta, Amazon and Microsoft fell between 1 percent and 2.5 percent in premarket trading.

“Tech is going to be bifurcated between the companies that are earning money today versus the companies that are promising to earn money tomorrow,” said Thomas Hayes, managing member at Great Hill Capital LLC in New York.

“The companies that are promising to earn money tomorrow but not earning today are going to take big haircuts.”

A monthly survey conducted by Deutsche Bank found that a majority of respondents believed U.S. technology stocks are in a bubble as investors remained more bearish on hawkish policy moves and higher yields.

Goldman Sachs fell 4.2 percent after missing fourth-quarter profit expectations on weak trading activity, while BNY Mellon inched up 0.2 percent after posting quarterly results.

Other lenders including Bank of America, Morgan Stanley, Citigroup and JPMorgan were down up to 1.6 percent.

At 8:37 a.m. ET, Dow e-minis were down 292 points, or 0.82 percent, S&P 500 e-minis were down 44.75 points, or 0.96 percent, and Nasdaq 100 e-minis were down 231.25 points, or 1.4 percent.

Later in the week, a U.S. Senate panel is also set to debate a bill that aims to rein in app stores of companies that some lawmakers say exert too much market control, including Apple and Alphabet’s Google.

The Nasdaq and the S&P 500 fell for a second straight week on Friday as bearish sentiment on tech and disappointing results from big banks weighed on the U.S. indexes made for a soft start to earnings season.

The S&P technology index has declined 4.8 percent so far since the start of 2022.

Bank of America and Morgan Stanley will post fourth-quarter results on Wednesday, while Netflix will kick-off reporting among big tech shares on Thursday.

In M&A news, Activision Blizzard gained 37.6 percent after Microsoft said it would buy the videogame publisher for $68.7 billion in cash, the largest deal in the sector. Microsoft’s shares declined 1.8 percent, while other gaming stocks Electronic Arts and Take-Two Interactive gained 6.6 percent and 3.6 percent respectively.

Starbucks fell 0.9 percent on partnering with China’s dominant food delivery firm, Meituan, to expand its reach in the second-biggest market globally.

Airbnb dropped 3.9 percent after Gordon Haskett cut the home rental firm’s shares to “hold” and lowered its target price.