By Yasin Ebrahim
Investing.com – The S&P 500 ended lower Monday, as energy was hurt by a slump in oil prices and tech wobbled on surging Treasury yields ahead of expectations for the Federal Reserve to hikes rates in the coming the days.
The S&P 500 fell 0.8%, the Dow Jones Industrial Average gained 0%, or 1 point, the Nasdaq fell 2%. The Nasdaq closed in bear market territory, defined as a 20% loss from a recent peak, for the first time since March 2020.
Little progress was made on Ukraine-Russia negotiations on Monday, but with talks set to resume on Tuesday, there is hope that both sides' willingness for ongoing dialogue could prove the building blocks toward a ceasefire agreement.
Oil prices, which have been underpinned recently by concerns that a prolonged Ukraine-Russia war would meaningfully disrupt crude supplies, moved sharply lower and took energy stocks along for the ride.
Sentiment on energy was further soured by downgrades from Morgan Stanley on oil majors including Occidental Petroleum (NYSE:OXY) and Chevron (NYSE:CVX) to equal-weight from overweight, citing valuation concerns.
With just days to go until the Federal Reserve is widely expected to begin its rate hiking cycle, Treasury yields surged higher. Rising rates, the enemy of growth sectors of the market like tech wobbled.
“After a 25 basis point hike at the March meeting, we see the Fed delivering an additional five 25 basis point rate hikes this year, followed by four hikes in 2023 to end the year at 2.625%,” Morgan Stanley said in a note.
Apple (NASDAQ:AAPL) led the move lower suffering a more than 2% decline amid some worries about a shortage of supplies after Foxconn, one of its major suppliers China, said it would suspend operations in Shenzhen following a rise in Covid-19 cases.
Alphabet (NASDAQ:GOOGL) and Amazon (NASDAQ:AMZN) were also 2% lower, while Facebook (NASDAQ:FB) bucked the trend up less than 1%.
But not all sectors are vulnerable to rising rates. Financials started the week on the front foot as investors bet that banks are set to benefit from a rising interest rates environment.
Northern Trust (NASDAQ:NTRS), Charles Schwab (NYSE:SCHW), Cincinnati Financial (NASDAQ:CINF), with the latter up more than 5%.
In other news, Ford (NYSE:F) slipped nearly 2% after Jefferies cut its price target on the automaker to $18 from $20 amid concerns that rising input costs and supply-chain woes will weigh on growth.