The S&P and the Nasdaq fell more than 1pc on Monday as rising bond yields weighed on megacap growth stocks such as Microsoft, Alphabet and Apple, with investors on edge ahead of Tuesday's inflation data.
Shares of Microsoft Corp, Apple Inc and Alphabet Inc fell between 1.9pc and 3.6pc, as the benchmark 10-year Treasury yield climbed to 2.77pc after touching a fresh three-year high earlier in the day.
The S&P 500 technology index slid 2.2pc, while the Philadelphia semiconductor index dropped 1.7pc.
Market-leading growth and technology stocks, that were underpinned by record low interest rates, have come under pressure since late March on signals from the U.S. Federal Reserve that it will hike rates aggressively to control soaring inflation.
"There's simultaneously a scare about growth and that's due to sort of a slowdown in the second half of the year if we look at GDP growth, along with rising interest rates on the front end of the curve, that's causing people be concerned about growth in the short term," said Jim Cahn, chief investments and business development officer at Wealth Enhancement Group.
Data on Tuesday is expected to show U.S. consumer prices leapt to a fresh four-decade high of 8.5pc in March, on a year-on-year basis, after hitting 7.9pc in February, as the Ukraine conflict drives up energy costs.
Nasdaq, S&P 500 slide as higher yields hit growth stocks
Electric-car maker Tesla Inc fell 3.6pc after data showed China auto sales plunged in March, hurt by the country's curbs to rein in COVID-19 outbreaks.
Nvidia Corp fell 6.0pc after Baird downgraded the chipmaker. Chip stocks have been among the worst casualties of the tech sell-off, with the Philadelphia semiconductor index down 22.2pc so far this year compared to the 13.8pc decline in Nasdaq.
Investors will also be focusing on the big U.S. banks, which kick off the first-quarter earnings season on Wednesday. They are expected to show a sharp decline in quarterly earnings from a year earlier.
The S&P 500 value index, which includes banking and energy stocks, has outperformed its growth counterpart so far this year, with the former nearly flat, while the growth index is down 12.8pc.
At 12:45 p.m. ET, the Dow Jones Industrial Average was down 235.40 points, or 0.68pc, at 34,485.72, the S&P 500 was down 56.89 points, or 1.27pc, at 4,431.39, and the Nasdaq Composite was down 239.36 points, or 1.75pc, at 13,471.63.
Twitter Inc rose 1.9pc in choppy trading, reversing its premarket losses after the social media company said Tesla boss Elon Musk rejected its offer to join the company's board.
Media and streaming firm Warner Bros Discovery Inc, formed from the $43 billion merger of Discovery Inc and assets of AT&T Inc, fell 2.4pc on the first day of trading. AT&T shares gained 6.8pc.
Declining issues outnumbered advancers for a 2.32-to-1 ratio on the NYSE and a 2.14-to-1 ratio on the Nasdaq.
The S&P index recorded 34 new 52-week highs and nine new lows, while the Nasdaq recorded 26 new highs and 271 new lows.
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