The Dow Jones Industrial Average dropped 534 points Tuesday as the 2-year and 10-year treasury yields rose to their highest levels since early 2020. Photo by John Angelillo/UPI | License Photo
Jan. 18 (UPI) -- U.S. markets plummetted Tuesday as bond yields rose to pandemic-era highs to start off a short week of trading.
The Dow Jones Industrial Average dropped 543.34 points, or 1.51%, while the S&P 500 fell 1.84% and the Nasdaq Composite closed the day down 2.6% after markets were closed Monday in observance of the Martin Luther King Jr. holiday.
The 2-year treasury yield, viewed as a gauge for where the Federal Reserve will set short-term borrowing rates, climbed above 1% for the first time since February 2020.
Additionally, the benchmark 10-year treasury note hit 1.86% its highest point since January 2020 after beginning 2022 at around 1.5%.
"The bond market is continuing to price in a more aggressive policy tightening by Federal Reserve based on still-high inflation and the Fed's more hawkish guidance," Kathy Bostjancic, the chief U.S. financial market economist at Oxford Economics said. "A fairly aggressive Fed tightening path will lead to somewhat lower valuations as economy-wide growth should slow as the Fed tries to soften the pace of demand."
Tech stocks took a dive amid the rising treasury yields with Facebook parent company, Meta, declining 4.14%, while Amazon fell 1.99% and Tesla dropped 1.82%.
Microsoft stock fell 2.43% after announcing it will acquire video game company, Activision Blizzard, for $68.7 billion in an all-cash transaction, while shares of Activision Blizzard rose 25.88%.
Shares of Goldman Sachs fell 6.98% after reporting fourth-quarter earnings that fell short of analysts' expectations including a decline in profit amid weakness in its section.
"Investment banking results based on surging advisory were really evident at Goldman Sachs, but I think trading revenues are going to be a little lighter because the pandemic-induced volatility is beginning to abate," abrdn senior bank analyst and portfolio manager Jon Curran told Yahoo Finance.
So far, 33 S&P 500 companies have reported calendar fourth-quarter earnings and nearly 70% have posted results that exceeded analysts expectations.