ASX set to fall as Wall Street’s tech woe continues

Stocks fell broadly in afternoon trading on Wall Street on Monday and bond yields continued rising as investors anticipate moves by the Federal Reserve to raise interest rates.

In early afternoon trade, the S&P 500 is 1.2 per cent lower, the Dow Jones has shed 1 per cent and the tech-heavy Nasdaq has fallen by 1.4 per cent. The Australian sharemarket is set to fall sharply, with futures at 5.35am AEDT pointing to a fall of 65 points or 0.9 per cent, at the open.

Technology stocks again led broader market lower. The sector has been the biggest weight on the market through January and is coming off of its worst week since October 2020. Big technology stocks have an outsized influence on the S&P 500 because of their huge size. Coming into the year, the technology sector represented 29.2 per cent of the S&P 500. Microsoft fell 2.3 per cent and Apple shed 2.1 per cent.

Wall Street is closely watching the Federal Reserve for clues as to how soon it might raise interest rates. The central bank has already said it will accelerate the reduction of its bond purchases, which have helped keep interest rates low. The market now puts the chances of the Fed hiking rates by at least a quarter point in March at around 78 per cent. A month ago, it was about 36 per cent.

Higher interest rates make the stocks of expensive tech companies and other pricey growth companies less attractive to investors, which is why the sector has been slipping while bond yields rise.

The yield on the 10-year Treasury rose to 1.79 per cent from 1.76 per cent late Friday.

Every sector in the benchmark S&P 500 fell, though sectors that are considered less risky, including utilities and household goods makers, held up better than the rest of the market.

Elsewhere in the market a mix of deal news and financial updates moved several large stocks.

Take-Two Interactive, maker of Grand Theft Auto, plunged 14.1 per cent after announcing a deal to buy Zynga, which makes “Words With Friends” and “Farmville” and jumped 45 per cent.