Stocks on Wall Street opened lower on Tuesday after expectations of a rate hike by the Federal Reserve drove a bout of volatility in global markets in the previous session.

The blue-chip S&P 500 was down 0.4% in early New York trade, while its information technology subindex lost 0.7%. The tech-heavy Nasdaq Composite fell 0.4%.

Nasdaq Monday A brief dip into correction territory It ended the day up just under 0.1% as traders fled richly valued tech stocks.

Like other global stock markets, the Stoxx 600 in Europe rose 0.8% on Tuesday as U.S. monetary policy underpinned borrowing costs and equity valuations for companies around the world. The European index fell 1.5 percent on Monday, its worst one-day performance since November.

Markets have priced in the Fed’s pandemic-era stance ahead of last week’s strong U.S. jobs data and inflation data in which economists polled by Reuters expect U.S. consumer prices to rise 7 percent in the year to December. The first rate hike to March. Investment bank Goldman Sachs expects four U.S. interest rate hikes this year.

“It’s all about the Fed right now, nothing else really matters,” said Hani Redha, portfolio manager at PineBridge Investments.

The U.S. central bank started buying about $120 billion a month in U.S. Treasuries and mortgage-backed securities in March 2020 to keep borrowing costs in check and insulate markets from the coronavirus shock, but it has scaled back purchases and is making ready to shrink Its $9 trillion balance sheet.

Quantitative easing “guides investors further down the risk curve,” Redha said, by raising prices and lowering bond yields, “so you invest in stocks first and then in more speculative areas like unprofitable ones. technology company”.

“Now that’s all reversed as they shrink their balance sheets and drain excess liquidity from the system.”

But Gavekal analyst Anatole Kaletsky thinks “buying the dip” after the Nasdaq pullback makes sense. “Inflation is peaking and it’s not as bad as it looks anyway,” he said. “The year-on-year inflation rate that everyone is panicking about is misleading because it includes the huge returns from the price collapse in the first year of the pandemic.”

“There is a clear incentive for governments and central banks to lower borrowing costs,” he added, given the high levels of government and corporate debt that have accumulated in an era of ultra-low interest rates.

The yield on the benchmark 10-year U.S. Treasury note was flat at around 1.77%, having traded above 1.8% on Monday. The two-year U.S. Treasury yield, which closely tracks expectations for borrowing costs, rose 0.03 percentage point to around 0.94%.

Government bond prices tend to fall in anticipation of higher interest rates and inflation, which reduce the real returns on fixed-income payment securities. German 10-year bond yields were basically stable at -0.03%.

In Asia, Hong Kong’s Hang Seng closed flat and Tokyo’s Nikkei 225 fell 0.9%. Brent crude, the energy benchmark, rose 1.6% to $82.19 a barrel.