Stocks finished mixed Monday with the tech sector staging a comeback after being rattled by last week's hawkish Fed minutes.
The Dow Jones Industrial Average finished down 162 points, or 0.45%, to 36,068 and the S&P 500 dropped 0.14%, while the tech-heavy Nasdaq, which came off its worst week since last February, finished up 0.05%.
"The market has gotten off to a chilly start with stocks seemingly still digesting the FOMC minutes surprise — with the Fed revealing a more aggressive agenda," said Chris Larkin, managing director of trading for E*Trade. "But keep in mind the S&P hit two new records to kick off 2022. And with recent history as our guide, retail traders are pretty resilient."
With earnings season about to kickoff, Larkin said, "the spotlight could come off the Fed for a bit, as traders get a temperature check on balance sheets."
The benchmark 10-year Treasury yield rose 1.7%.
Goldman Sachs increased its estimate of the number of Federal Reserve interest rate hikes this year to four from three, as the Fed has taken a more hawkish policy stance.
In the minutes of its December meeting, released Wednesday, the Fed said rampant inflation and a red-hot job market could necessitate rate hikes “sooner or at a faster pace than participants had earlier anticipated.”
"Every trader over the weekend read the Goldman note that eyed four Fed rates hikes and balance sheet runoff in July, if not sooner," said Edward Moya, senior market analyst for the Americas with Oanda. "Surging yields are kryptonite for many tech stocks and that theme won't change until after we get past the first couple rate hikes."
Federal Reserve Chairman Jerome Powell is scheduled to take questions from the Senate Banking Committee as part of his renomination process Tuesday.
December data on inflation and retail sales are due on Wednesday and Friday.
Federal Reserve Vice Chairman Richard Clarida said Monday he will be leaving his position on Friday with just a few weeks left on his term.
The announcement came as Clarida faced more scrutiny about trades he made in 2020 as the central bank was poised to rescue financial markets.
Wall Street's biggest banks will kick off the fourth quarter earnings season Friday with reports from JPMorgan Chase (JPM) - Get JPMorgan Chase & Co. Report, Citigroup (C) - Get Citigroup Inc. Report and Wells Fargo (WFC) - Get Wells Fargo & Company Report.
Lululemon Athletica (LULU) - Get Lululemon Athletica Inc Report shares finished down 1.9% after the athletic and leisure apparel company cautioned that its fourth quarter earnings would likely be hit by staff shortages and reduced store hours linked to the global surge in Omicron infections.
Zynga (ZNGA) - Get Zynga Inc. Class A Report soared 40.7% after Take-Two Interactive (TTWO) - Get Take-Two Interactive Software, Inc. Report said it would buy Zynga in a $12.7 billion deal that combines the maker of video game hits such as Grand Theft Auto and NBA 2k with the leading developer of mobile and social gaming network platform.