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Stock Market Today - 1/18: Dow Closes Down 500 Points as Oil Prices, Treasury Yields Surge

Stocks slumped Tuesday, while Treasury bond yields leapt and oil prices surged to the highest levels in seven years.
  • Stocks slide amid surge in global oil prices and a jump in benchmark Treasury bond yields.
  • Inflation fears resurface as oil hits a new seven-year high and JPMorgan CEO Jamie Dimon sees as many as six Fed rate hikes before the end of the year.
  • Benchmark 2-year note yields rise to 1.03%, the highest in two years, while 10-year yields hit a post pandemic peak of 1.879% in overnight trading.
  • Earnings take center-stage this week with 40 S&P 500 companies reporting; Refinitv forecasts see collective profits rising 23.1% to $434.4 billion.
  • Goldman Sachs misses Q4 earnings forecast even as investment banking fees surge amid a record year for M&A activity.
  • Activision Blizzard shares soar after proposed $68.7 billion takeover by Microsoft
  • Airlines warn of flight cancellation chaos as 5G network rollouts are set to begin later this week.

Updated at 4:20 pm EST.

Stocks slumped Tuesday, while Treasury bond yields leapt and oil prices surged to the highest levels in seven years, as investors look to kick-off another key week in corporate earnings gripped by concern over inflation and Federal Reserve rate hikes.

The Dow Jones Industrial Average had its worst day of the new year, ending down 543 points, or 1.51%, to 35.368, while the S&P 500 lost 1.85%, extending its year-to-date decline to around 3.95%.

The tech-focused Nasdaq, meanwhile, fell 2.6% as benchmark 10-year Treasury note yields climbed to a post-pandemic high of 1.879%.

Benchmark 2-year note yields rose past 1% in overnight trading for the first time in nearly two years, reflecting investor concern for not only a prolonged period of faster inflation readings but also an aggressive response from the Fed, which could raise rates at least three times this year.

The CME Group's FedWatch tool is pricing in an 88.4% chance of a hike in March, while JPMorgan CEO Jamie Dimon warned last week that as many as six rate increases could be needed to combat the fastest inflation in 40 years.

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Brent crude prices rose 1.6% to $87.88 a barrel, the highest in seven years, following an attack on the United Arab Emirates by Houthi rebels from Yemen -- which are aligned with Tehran -- that has sparked concerns over supply disruption in the Middle East region.

Earnings will also take center-stage later this week, with updates from Procter & Gamble  (PG) - Get Procter & Gamble Company Report, United Health  (UNH) - Get UnitedHealth Group Incorporated Report, United Airlines  (UAL) - Get United Airlines Holdings, Inc. Report and Netflix  (NFLX) - Get Netflix, Inc. Report highlighting a week where 40 S&P 500 companies will report. 

Collective S&P 500 profits are expected to rise 23.1% to $434.4 billion, according to Refinitiv forecasts, before slowing to an annual rate of around 19.5% for the whole of 2022.

Activision Blizzard  (ATVI) - Get Activision Blizzard, Inc. Report shares skyrocketed nearly 26% after Microsoft  (MSFT) - Get Microsoft Corporation Report proposed the biggest-ever takeover deal in the video game sector that would value the Call of Duty maker at $68.7 billion.

Goldman Sachs  (GS) - Get Goldman Sachs Group, Inc. Report kicked-off this week's earnings slate with a weaker-than-expected fourth quarter report, sending shares 7% lower.

Airline shares were also in focus following yet another weekend of flight chaos and a warning on the impact of 5G networks on aircraft navigation systems.

United Airlines  (UAL) - Get United Airlines Holdings, Inc. Report, American Airlines  (AAL) - Get American Airlines Group, Inc. Report and Delta Air Lines  (DAL) - Get Delta Air Lines, Inc. Report were all lower.

In overseas markets, Europe's Stoxx 600 closed nearly 1% lower in Frankfurt at 480.37 points, while Japan's Nikkei 225 closed 0.27% lower in Tokyo at 28,257.25 points.