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Wall St is falling, while dividends are hitting technology, banks are falling after the Goldman miss

The Nasdaq logo will be displayed at the Nasdaq Market in Times Square, New York City, USA, on December 3, 2021. REUTERS / Jeenah Moon

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  • Goldman shares are down 7% as profits are hit by weaker trading
  • Benchmark yields on US government bonds jump to two-year highs
  • Activision rises with a Microsoft deal of $ 68.7 billion
  • Index down: Dow 1.45%, S&P 1.73%, Nasdaq 2.24%

January 18 (Reuters) - Wall Street's main index fell sharply on Tuesday as weak performance from Goldman Sachs weighed on financial stocks and tech stocks continued their sell-offs to start the year as US government bond yields rose to milestones.

Goldman Sachs (GS.N) shares fell 7.3% after the investment bank missed quarterly earnings expectations due to weak trading activity. Financials (.SPSY) was the largest declining S&P 500 sector, down 2.4%.

Benchmark yields on U.S. government bonds jumped to two-year highs, and two-year yields broke 1% as traders prepared for the Federal Reserve to be more aggressive in tackling unabated inflation.

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The steep rise in interest rates to start in 2022 has particularly weighed on technology and growth stocks, whose future expected cash flows are discounted back more sharply as interest rates rise.

"The hot inflationary pressures have scared the market that the Fed will move, and so we are seeing this rise in interest rates," said Mona Mahajan, senior investment strategist at Edward Jones.

"It's not just the rise in yields, but the rapid rise in yields ... that is really causing some indigestion in the market, but especially in growth, higher valuation, more speculative asset classes," Mahajan said.

The Dow Jones Industrial Average (.DJI) fell 520.39 points, or 1.45%, to 35,391.42, the S&P 500 (.SPX) lost 80.55 points or 1.73% to 4,582.3 and the Nasdaq Composite (. 334 or 3.34 points). 2.24% to 14,559.44.

All 11 major S&P 500 sectors traded lower with the heavy technology sector down 2.1%.

Declines in megacap stocks, including Microsoft (MSFT.O), Apple (AAPL.O) and Amazon, weighed the most on the S&P 500 among individual stocks.

A BofA survey showed that fund managers had cut their overweight positions in technology down to their lowest levels since 2008, while another survey conducted by Deutsche Bank showed that a majority of respondents believed that US technology stocks are in bubble territory. Read more

The Nasdaq fell as much as 9.5% below its closing record on November 19th. To confirm a correction, the index must close 10% or more during the record close.

"We have a rescheduling going on as the market prepares for rate hikes, and we still have a long way to go to prepare for three rate hikes or four rate hikes," said Michael O'Rourke, chief market strategist at JonesTrading. "We have not priced that in."

Investors focus on next week's Fed policy meeting to get more clarity on central banks' next steps to curb inflation. Data last week showed that US consumer prices rose solidly in December, culminating in the largest annual rise in inflation in nearly four decades. Read more

In company news, Activision (ATVI.O) shares rose 25% after Microsoft (MSFT.O) announced a $ 68.7 billion buy-in video game maker. Shares of other video game companies rose, with Electronic Arts (EA.O) up 4.5% and Take-Two Interactive Software (TTWO.O) up 2.2%. Microsoft stock fell 2 percent. Read more

Falling issues exceeded the number of advanced on the NYSE by a ratio of 6.32 to 1; on the Nasdaq favored a ratio of 4.90 to 1 folders.

The S&P 500 released 32 new 52-week highs and eight new lows; The Nasdaq Composite recorded 63 new highs and 534 new lows.

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Reporting by Bansari Mayur Kamdar, Shreyashi Sanyal, Sruthi Shankar in Bengaluru, Sinéad Carew in New York and Danilo Masoni in Milan; Edited by Maju Samuel and Lisa Shumaker

Our standards: Thomson Reuters Trust Principles.

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