By Yasin Ebrahim

Investing.com – The S&P 500 bounced off lows Monday, as selling in tech eased following heavy intraday selling amid growing expectations for a faster pace of monetary policy tightening from the Federal Reserve.

The S&P 500 fell 1%, the Dow Jones Industrial Average slipped 0.9%, or 340 points, the Nasdaq lost 1.3%.

Tech pared some its intraday losses after starting the day on the back following expectations for a more aggressive pace of rate hikes, the enemy of growth stocks. Goldman Sachs lifted its Fed rate hike forecast to four hikes this year compared with prior estimates of three hikes.

Pointing to “declining labor market slack and “upside inflation risks,” Goldman’s Chief Economist Jan Hatzius said the bank continues “to see hikes in March, June, and September, and have now added a hike in December for a total of four in 2022.”

The rate-hike outlook comes just a day ahead of Fed Chairman Jerome Powell’s confirmation hearing on Tuesday, when the Fed chief may offer fresh clues on monetary policy.

Meta Platforms (NASDAQ:FB), formerly know as Facebook, led the sea of red in tech, falling more than 2%. Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) were also nursing losses. Alphabet (NASDAQ:GOOGL) bucked the trend to trade flat.

Semiconductor stocks also weighed heavily on the broader tech sector, with ASML (NASDAQ:ASML), Marvell (NASDAQ:MRVL), and Lattice Semiconductor (NASDAQ:LSCC) among the biggest decliners.

The more cyclical, or value areas of the market including energy and financials, which tend to perform well in an increasing interest rate environment were outperforming the broader market.

“[T]he cheapest stocks tend to outperform the most expensive stocks when interest rates are rising. Today, energy and financials remain well represented on the list of the cheapest names, while technology remains well represented on the list of the most expensive names,” {{RBC said in a note}}.

“[W]e think the outperformance trade in value/cyclical isn’t done yet,” it added.

Financials were up about 0.9%, with major Wall Street banks trading just below the flatline ahead of the quarterly earnings season, which gets underway on Friday.

JPMorgan (NYSE:JPM), Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) report earnings on Friday.

Lululemon Athletica (NASDAQ:LULU), meanwhile, warned that fourth-quarter results would suffer hit from the impact of the omicron Covid-19 variant. Lululemon now expected fourth-quarter adjusted earnings per share also toward the low end of its range of $3.25 to $3.32, with revenue also expected within the lower of guidance range of $2.13 billion to $2.17 billion.

In deal making news, Zynga (NASDAQ:ZNGA) agreed to be acquired by video game maker Take-Two (NASDAQ:TTWO) Interactive in a deal worth $12.7 billion, sending its shares more than 42%. Take-Two fell 15%.

“We’ve been anticipating a strong start to the year for value/cyclical, followed by a pivot back to growth/secular later in the year,” RBC said. “So far that’s playing out, and we think the outperformance trade in Value/Cyclical isn’t done yet.”

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