Following the steep drop seen last Friday, stocks showed another substantial move to the downside over the course of the trading session on Monday. The major averages moved notably higher early in the session but pulled back sharply as the day progressed.

The major averages all closed firmly in the red, with the tech-heavy Nasdaq showing a particularly steep drop. The Nasdaq plunged 290.08 points or 1.8 percent to 15,885.02, the S&P 500 tumbled 61.59 points or 1.2 percent to 5,061.82 and the Dow slid 248.13 points or 0.7 percent to 37,735.11.

With the extended slump, the Dow fell to a nearly three-month closing low, while the Nasdaq and the S&P 500 hit their lowest closing levels in almost two months.

The early strength on Wall Street partly reflected a positive reaction to earnings news from Goldman Sachs (GS), as the investment banking company reported first quarter earnings that far exceeded analyst estimates on better than expected revenues.

Traders also initially reacted positively to a Commerce Department report showing much stronger than expected U.S. retail sales growth in the month of March.

The Commerce Department said retail sales climbed by 0.7 percent in March after advancing by an upwardly revised 0.9 percent in February.

Economists had expected retail sales to rise by 0.3 percent compared to the 0.6 percent increase originally reported for the previous month.

Excluding a pullback by sales by motor vehicle and parts dealers, retail sales jumped by 1.1 percent in March after climbing by 0.6 percent in February. Ex-auto sales were expected to rise by 0.4 percent.

Buying interest evaporated shortly after the start of trading, however, as the retail sales data triggered another spike by treasury yields.

The yield on the benchmark ten-year note surged to its highest levels in five months, as the data led to renewed concerns about the outlook for interest rates.

Following the latest data, CME Group’s FedWatch Tool is currently indicating just a 21.6 percent chance of a quarter point rate cut in June.

“The robust gain in retail sales in March followed by upward revisions in the prior two months shows the consumer continues to power the overall economy forward,” said Nationwide Chief Economist Kathy Bostjancic.

However, she added, “The lack of moderation in consumer spending and inflation will undermine Fed officials’ confidence that inflation is on a sustainable course back to 2% and likely delays rate cuts to September at the earliest and could push off rate reductions to next year.”

Sector News

Software stocks moved sharply lower over the course of the session, dragging the Dow Jones U.S. Software Index down by 2.4 percent to its lowest closing level in almost two months.

Considerable weakness also emerged among networking stocks, as reflected by the 2.0 percent slump by the NYSE Arca Networking Index. The index tumbled to a four-month closing low.

Interest rate-sensitive commercial real estate stocks also saw significant weakness, with the Dow Jones U.S. Real Estate Index falling by 1.7 percent.

Computer hardware, housing and biotechnology stocks also came under pressure over the courses of the session, moving lower along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower on Monday. Japan’s Nikkei 225 Index and Hong Kong’s Hang Seng Index both slid by 0.7 percent, although China’s Shanghai Composite Index bucked the downtrend and jumped by 1.3 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the U.K.’s FTSE 100 Index fell by 0.4 percent, the French CAC 40 Index rose by 0.4 percent and the German DAX Index climbed by 0.5 percent.

In the bond market, treasuries moved sharply lower in reaction to the retail sales data. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, surged 12.9 basis points to a five-month closing high of 4.628 percent.

Looking Ahead

Reports on housing starts and industrial production may attract attention on Tuesday along with remarks by Fed Chair Jerome Powell.

On the earnings front, Bank of America (BAC), Johnson & Johnson (JNJ), Morgan Stanley (MS) and UnitedHealth (UNH) are among the companies due to report their quarterly results before the start of trading.