U.S. stocks dropped Monday as investors looked ahead to the start of corporate earnings season this week and a bevy of new economic data as the Federal Reserve prepares to accelerate its moves to counter inflation.
The S&P 500 declined by 1.7% and added to last week's losses. Nasdaq dropped more than 2% as technology stocks came under renewed pressure. Treasury yields climbed, and the benchmark 10-year yield rose above 2.7% to reach the highest level since January 2019.
Concerns over inflation, rising commodity prices amid Russia's war in Ukraine, and the Federal Reserve's monetary policy path forward remained at the center of investors' attention. On Tuesday, traders are set to receive the latest Consumer Price Index from the Bureau of Labor Statistics, which is expected to show a staggering 8.4% year-over-year increase in prices for the biggest leap since 1982. And this comes as Fed officials have increasingly talked of larger-than-average 50 basis-point interest rate hikes this year to help bring down prices. Last week, the Fed's March meeting minutes also showed the central bank was gearing up to begin rolling off assets from its $9 trillion balance sheet, in a further move removing financial market support and pivoting away from pandemic-era accommodative policies.
"If we think about recent cycles that are comparable, I think about 2018, 2019, the Fed was raising interest rates and running off its balance sheet. That should sound very familiar," Seth Carpenter, global chief economist for Morgan Stanley, told Yahoo Finance on Friday. "But at the end of 2018, risk markets started to crack and the Fed reversed course really quickly."
"The key difference now between those two episodes is they are trying to pull inflation down. They're not trying to keep it from rising," he added. "And so what that means is they're trying to slow the U.S. economy. They're trying to slow growth so much that inflation pressures come down but not so much that they tip us over into recession. And that's tricky."
Meanwhile, the start of the latest quarterly corporate earnings season this week will help show how individual companies have navigated inflationary pressures and the specter of slowing economic growth. As of Friday, Wall Street analysts expected S&P 500 earnings to grow 4.5% for the first quarter over last year, according to FactSet data. If realized, this would mark the slowest rate since the fourth quarter of 2020.
"Guidance and management commentary will be particularly important sources of information this quarter given the earnings uncertainty going forward," David Kostin, Goldman Sachs chief U.S. equity strategist, wrote in a note Monday. "Consistent with prior quarters, guidance has recently been a key differentiator of stock performance."
4:05 p.m. ET: Stocks slide, tech shares lag as Treasury yields spike: Nasdaq drops 2.2%, S&P 500 sheds 1.7%
Here were the main moves in markets as of 4:05 p.m. ET:
S&P 500 (^GSPC): -75.75 (-1.69%) to 4,412.53
Dow (^DJI): -413.04 (-1.19%) to 34,308.08
Nasdaq (^IXIC): -299.04 (-2.18%) to 13,411.96
Crude (CL=F): -$3.33 (-3.39%) to $94.93 a barrel
Gold (GC=F): +$2.60 (+0.13%) to $1,944.20 per ounce
10-year Treasury (^TNX): +6.7 bps to yield 2.7800%
3:00 p.m. ET: Fed's Evans says 50 basis point rate hike 'is obviously worthy of consideration'
Chicago Federal Reserve Bank President Charles Evans joined the chorus of Fed speakers publicly discussing prospects of a 50 basis point interest rate hikes as inflationary pressures remain elevated.
"Fifty is obviously worthy of consideration. Perhaps it's highly likely even if you want to get to neutral by December," Evans said in remarks before the Detroit Economic Club on Monday.
He added, however, that "the optionality of not going too far too quickly is important," stressing the flexibility the Fed will still need to exercise as new data on the economy comes in.
1:09 p.m. ET: Microsoft shares drop after UBS says Office 365 business likely to see 'gentle deceleration'
Microsoft (MSFT) shares were lower intraday on Monday after UBS analysts suggested the tech company's Office 365 business would begin to see a sales slowdown following a work-from-home spike in business.
UBS analyst Karl Keirstead said he saw Office 365 revenue growing by 17.4% in fiscal 2023, compared to the 19.1% growth rate seen previously, according to a Bloomberg report citing UBS.
Microsoft shares fell nearly 4% at session lows before paring some declines.
11:30 a.m. ET: U.S. consumer inflation expectations rose further in March: New York Fed
U.S. consumers are now looking for an even more marked increase in prices next year than previously anticipated, according to a new survey from the New York Federal Reserve released Monday.
Consumers anticipate inflation will rise by 6.6% in the next year, according to the New York Fed, representing the fastest expected rate since the survey first began in 2013. In February, consumers expected year-ahead inflation would rise by 6.0%.
Meanwhile, only 23% of survey respondents believed their finances would improve in the next year, with this proportion also marking the least since the survey's 2013 inception.
9:30 a.m. ET: Stocks kick off the week lower
Here were the main moves in markets as of 9:30 a.m. ET:
S&P 500 (^GSPC): -28.10 (-0.63%) to 4,460.18
Dow (^DJI): -100.65 (-0.29%) to 34,620.47
Nasdaq (^IXIC): -162.58 (-1.19%) to 13,548.42
Crude (CL=F): -$3.74 (-3.81%) to $94.52 a barrel
Gold (GC=F): +$20.70 (+1.06%) to $1,966.30 per ounce
10-year Treasury (^TNX): +4.2 bps to yield 2.7550%
7:13 a.m. ET: Twitter shares dip after Musk decides not to join board
Shares of Twitter (TWTR) dropped Monday morning, giving back some of last week's gains after Tesla CEO Elon Musk opted not to join the board of the social media company after taking a more than 9% stake.
"Elon's appointment to the board was to become officially effective 4/9, but Elon shared that same morning that he will no longer be joining the board. I believe this is for the best," Twitter CEO Parag Agrawal said in a tweet Monday. "We have and will always value input from our shareholders whether they are on our Board or not. Elon is our biggest shareholder and we will remain open to his input."
"There will be distractions ahead, but our goals and priorities remain unchanged," Agrawal added. "The decisions we make and how we execute is in our hands, no one else's."
7:07 a.m. ET Monday: Stock futures head for a lower open
Here's where markets were trading Monday morning before the opening bell:
S&P 500 futures (ES=F): -15 points (-0.33%) to 4,468.50
Dow futures (YM=F): -24 points (-0.07%) to 34,589.00
Nasdaq futures (NQ=F): -106.5 points (-0.74%) to 14,220.50
Crude (CL=F): -$2.49 (-2.53%) to $95.77 a barrel
Gold (GC=F): +$16.00 (+0.82%) to $1,961.60 per ounce
10-year Treasury (^TNX): +4.2 bps to yield 2.757%
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter.