Volatility gripped financial markets as a selloff in some of the world’s largest technology companies dragged down stocks.

Megacaps such Apple Inc., Tesla Inc. and Amazon.com Inc. sent the Nasdaq 100 slumping, while the S&P 500 pared losses amid a rebound in commodity, financial and industrial shares. The dollar advanced after Treasury Secretary Janet Yellen said interest rates may have to rise modestly at one point to prevent the economy from overheating.

Her remarks added to the debate on whether government spending could boost inflation at a time when stock valuations hovered near the highest in two decades. Hedge funds have been bailing from equities at a pace not seen since the financial crisis, while shares have struggled to gain traction despite stellar earnings. The mere suggestion the Federal Reserve may have to lift rates was enough for investors to head for the exits after the latest rally sparked speculation of a bubble.

“We’ve had this spectacular run-up, and I think we’ve seen momentum just run out of steam,” said Fiona Cincotta, senior financial markets analyst at City Index. “Despite earnings being encouraging, they haven’t managed to push those indices higher. Moving out of growth and into cyclicals is the place we’re going to have more movement.”

Earlier Tuesday, a sharp drop in equity futures left traders scrambling for an explanation. Some of them speculated on military tensions between China and Taiwan, Singapore’s tougher coronavirus restrictions and Ferrari NV’s decision to postpone financial targets.

Investors also monitored the latest economic readings, with the U.S. trade deficit widening to a new record in March. Meanwhile, a senior White House economic aide demurred on the question of whether President Joe Biden will nominate Fed Chair Jerome Powell for a second four-year term, saying the decision on selecting the next central bank chief will come after a thorough “process.”

Here are some key events to watch this week:

• U.S. ADP employment change is due Wednesday
• Chicago Fed President Charles Evans gives a virtual speech at an event hosted by Bard College on Wednesday. Cleveland Fed President Loretta Mester gives a virtual speech to the Boston Economic Club
• Bank of England rate decision Thursday
• The April U.S. employment report is released on Friday

These are some of the main moves in markets:

Stocks

• The S&P 500 fell 0.7 per cent as of 4 p.m. New York time
• The Nasdaq 100 fell 1.85 per cent
• The Dow Jones Industrial Average was little changed
• The MSCI World index fell 0.8 per cent

Currencies

• The Bloomberg Dollar Spot Index rose 0.3 per cent
• The euro fell 0.4 per cent to US$1.2016
• The British pound fell 0.2 per cent to US$1.3890
• The Japanese yen fell 0.2 per cent to 109.28 per dollar

Bonds

• The yield on 10-year Treasuries was little changed at 1.59 per cent
• Germany’s 10-year yield declined three basis points to -0.24 per cent
• Britain’s 10-year yield declined five basis points to 0.79 per cent

Commodities

• West Texas Intermediate crude rose 2 per cent to US$66 a barrel
• Gold futures fell 0.8 per cent to US$1,778 an ounce

--With assistance from Andreea Papuc, Yakob Peterseil, Vildana Hajric, Kamaron Leach, Sophie Caronello and Nancy Moran.