What happened
Shares of Datadog (DDOG +2.49%), a cloud-based monitoring and analytics company, were tumbling today as investors responded to a broad market sell-off.
The tech stock was down by 11% as of 1:53 p.m. ET on Monday.
So what
The tech-heavy Nasdaq Composite was down by 3.6% as investors took note that the 10-year Treasury yield reached its highest level since 2018, surpassing 3%. Higher Treasury yields can convince investors to move their money out of the stock market and into less risky investments.
Image source: Getty Images.
And investors have already been eager to do exactly that, as inflation has reached a 40-year high. The Federal Reserve voted earlier this month to raise the Fed funds rate by 50 basis points, which should help curb inflation but could come at the cost of slowing down the economy.
With more rate hikes likely on the way this year, investors are anticipating a slowdown and looking to put their money into more stable investments, like Treasury notes.
Now what
Today's drop comes on top of Datadog's stock price slide since it released its first-quarter financial results last Thursday. Surprisingly, the company reported earnings and sales that beat analysts' consensus estimates, but its share price has continued falling nonetheless.
Instead of focusing on a great quarter, it's clear that Datadog investors are looking at the rest of the market turmoil and the potential for more interest rate hikes and are panicking about what they see.
Considering that there are likely to be more price swings for the broader market as investors try to gauge how resilient the U.S. economy is, Datadog shareholders might want to prepare for more instability as well.
