ASX set to slide as tech, rate worries weigh on Wall Street

Stocks fell in afternoon trading on Tuesday in New York and bond yields jumped as investors monitor the latest developments around Russia’s war against Ukraine and prepare for the next round of corporate earnings reports.

In late trade, the S&P 500 is 0.8 per cent lower, the Dow Jones has shed 0.6 per cent and the Nasdaq has slumped by 2.1 per cent. It sets up the Australian sharemarket for losses, with futures at 4.57am AEST pointing to a fall of 38 points, or 0.5 per cent, at the open.

Weakness from big technology stocks weighed down the broader market. Companies in the sector, with their pricey valuations, tend to push the market higher or lower more forcefully. Chipmaker Qualcomm fell 4.6 per cent.

Twitter rose another 4.2 per cent after disclosing an arrangement with Tesla chief Elon Musk that will give him a board seat but also limit how much of the company he can buy while he’s a director. The company disclosed a day earlier that the mercurial billionaire and Twitter critic had become the company’s largest shareholder.

Treasury yields jumped again as investors brace for more aggressive moves by the Federal Reserve to rein in the hottest inflation in 40 years. Federal Governor Lael Brainard said in a speech that it’s “of paramount importance” and that the central bank is set to keep raising short-term interest rates following its March hike, which was its first increase since 2018.

Traders are pricing in a nearly 78 per cent probability the Fed will raise its key overnight rate by half a percentage point at its next meeting in May. That’s double the usual amount and something the Fed hasn’t done since 2000. That helped the yield on the two-year Treasury jump to 2.51 per cent from 2.46 per cent, its highest level since March 2019.

Brainard said the Fed would also soon throw into reverse the massive bond-buying program it engineered through the pandemic to keep longer-term rates low. She said the Fed could decide to roll some bonds off its balance sheet as soon as its May meeting, and “at a rapid pace.”

That helped the 10-year Treasury yield jump to 2.56 per cent from 2.46 per cent before Brainard’s speech, its highest level since April 2019.

Higher interest rates tend to most hurt stocks that are seen as the priciest, which puts the focus on big technology and other high-growth stocks. Apple and Tesla were some of the biggest weights on the market.