Wall Street reels from sell-off in tech shares as Apple and Microsoft stumble
Wall Street fell sharply on Thursday, with the S&P 500 and the Dow industrials suffering their worst daily percentage drops in about six weeks, as a recent decline in technology shares deepened and outweighed strength in bank shares.
The technology sector, which has led the S&P 500’s 8-per cent gain for the year, dropped 1.8 per cent, and were the worst-performing major group. Declines in big tech stocks, including Apple and Microsoft, weighed the most on the benchmark S&P.
Financials and energy were the only sectors in positive territory as investors may have been rotating into groups that have lagged this year.
“US equities have remained extended, at or close to record territory for an extended period of time really without a tremendous amount of conviction in the market,” said Peter Kenny, senior market strategist at Global Markets Advisory Group, in New York.
“It’s really been treading water. Without a major stimulus to drive prices higher, equities have to reset and that’s what they’re doing today,” Kenny said.
The Dow Jones Industrial Average fell 167.58 points, or 0.78 per cent, to 21,287.03, the S&P 500 lost 20.99 points, or 0.86 per cent, to 2,419.7 and the Nasdaq Composite dropped 90.06 points, or 1.44 per cent, to 6,144.35.
The Nasdaq closed below its 50-day moving average for the first time since April 13, breaking below a key technical support level.
The CBOE Volatility index, the widely followed barometer of expected near-term stock market volatility, rose to a six-week high of 15.16, before paring some of the move.
Equity investors also may be concerned about the rise in interest rates globally, as a slew of hawkish comments from central banks signalled the beginning of the end of ultra-loose monetary policy. European stocks also declined.
With the second quarter coming to a close, the market has experienced a volatile few days. Just on Wednesday, the tech-heavy Nasdaq had posted its best day since November 7.
Financials were the bright spot for the stock market, rising 0.7 per cent.
Bank stocks gained after the US Federal Reserve approved the banks’ plans to raise dividend payouts and share buybacks under its annual stress test programme. Wells Fargo shares rose 2.7 per cent while Citigroup gained 2.8 per cent.
Energy inched 0.1 per cent higher. Oil prices edged up after a decline in weekly US crude production temporarily eased concerns about oversupply.
“There’s a slight rotation,” said Omar Aguilar, chief investment officer for equities at Charles Schwab Investment Management. “You see the sectors that are underperforming are the ones that have done the best. Tech stocks are feeling the pain today, but it’s more of a technical reversal.”
Investors have been concerned about tepid US economic growth as the Fed is raising interest rates from very low levels.
Data showed the US economy slowed less sharply in the first quarter than initially estimated due to unexpectedly higher consumer spending and a bigger jump in exports.