LONDON – The Nasdaq index fell on Monday as most big technology stocks were pressured by an uptick in Treasury yields, while declines on the S&P 500 and the Dow Jones were countered by gains in shares of Tesla and Merck.

At 9:44 am ET, the Dow Jones Industrial Average was up 3.99 points, or 0.01 percent, at 34,330.45, the S&P 500 was down 16.02 points, or 0.37 percent, at 4,341.02 and the Nasdaq Composite was down 168.49 points, or 1.16 percent, at 14,398.21.

Keeping declines on the S&P 500 and Dow Jones Industrial Average at bay were shares of Merck & Co, which added 3.2 percent, building on gains from Friday after developing an experimental antiviral pill for those most at risk of contracting severe COVID-19.

Tesla Inc rose 2.6 percent after it had delivered a record electric cars in the third quarter, beating Wall Street estimates on Saturday.

Meanwhile, world stocks were on the back foot and the dollar stayed close to one-year highs on concerns that higher inflation and supply shortages would put global economic recovery at risk.

Stock markets slipped to 2-1/2-month lows last week, following a torrid September that saw them shed more than 4 percent.

A pan-European equity index that lost 2.2 percent last week seesawed around flat, while Asian shares earlier weakened, led by a 2.7 percent loss in the Hong Kong Special Administrative Region and a 1 percent fall in Japan’s Nikkei.

Francois Savary, CIO of Swiss wealth manager Prime Partners, said markets were increasingly pricing a stagflation scenario of lacklustre growth and high inflation, a headwind for stocks which have scaled a series of record highs and trade at expensive multiples.

“You can live with highly valued markets if you have the prospect of economic growth ahead. But if you think stagflation is becoming an issue and the only option is to tighten policy and kill economic activity, that’s not good for equities,” Savary said.

While recent data showed robust US consumer spending and factory activity, inflation fears are being fanned by crude futures near three-year highs of almost $80 a barrel and European gas prices approaching a record 100 euros per megawatt hour.

That, alongside persistent supply glitches, could force central banks to tighten policy sooner than expected.

Already, the core US PCE price index, the Fed’s preferred inflation measure, increased 3.6 percent in August from a year earlier, its biggest rise in three decades, while euro zone inflation hit 13-year highs.

While Fed boss Jerome Powell and other policymakers insist high inflation is transitory, Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities, noted “Powell also recently starting to hedge his comments too, leading investors to suspect he, too, is worried about inflation”.

Adding to the growth worries, investor morale in the euro zone fell for the third month in a row in October.

Oil and dollar

There may be little relief on the oil front as the OPEC plus group of producers will likely stick to existing agreements to produce an additional 400,000 barrels per day (bpd) in November, rather than adding output, Reuters reported.

Investors are looking ahead to Friday’s monthly US payrolls data, forecast by a Reuters poll to show 500,000 jobs added last month.

“All roads this week point to payrolls Friday, as unless there is a marked deterioration across the whole sweep of labour market indicators within the report, this will likely be the catalyst to cement the November taper,” Deutsche Bank wrote.

Those concerns have lifted the dollar near one-year highs against a basket of currencies and put it on track for its biggest annual rise since 2015.

The greenback eased slightly on Monday, allowing the euro to bounce to $1.16270, off Thursday’s 14-month low of $1.1563. It also dipped to 111.270 yen, staying below Thursday’s 1-1/2-year high of 112.08 yen.

“If you believe stagflation is coming, you want to get out of cyclical stocks and go into safe-havens like the dollar,” said Savary at Prime Partners.

US bond yields inched higher, but 10-year yields at 1.49 percent stayed off Tuesday’s three-month high of 1.567 percent.

The offshore-trade yuan, meanwhile, fell a quarter percent at 6.4502.