Wall Street tumbles as tech stocks droop
NEW YORK — US stocks dropped and the Nasdaq fell three percent on Monday as investors dumped Apple, Internet and other technology shares, further shaking confidence in a group of stocks that has propelled the long bull market.
Conflicting signals over the state of play between the United States and China on their trade dispute added to caution in the market.
Shares of Apple, Inc. fell after the Wall Street Journal reported the firm had cut production orders in recent weeks for all three iPhone models launched in September. The iPhone maker’s stock dropped four percent to $185.86 and is now down 19.9% from its Oct. 3 record closing high in the wake of a disappointing holiday quarter sales forecast and weak outlooks from several suppliers. The S&P 500 technology index, down 3.8%, led sector losses.
Other market leaders — including the ‘FANG’ stocks — also fell sharply. Shares of Facebook were down 5.7%, Amazon.com was down 5.1%, Netflix fell 5.5% and Alphabet fell 3.8%. Since the FANG outperformance run peaked on Aug. 30, the group has underperformed the S&P 500 by 16.25%. That is their worst underperformance since the first half of 2014, when they underperformed by around 20%.
“You’re seeing that rotation away from tech. Certainly the indexes are much more growthoriented because of the sheer size of those companies now, and they dominate the indexes,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago. “You’re going to have more underperformance of the growth names.” The S&P utilities and real estate sectors were the only two that ended in positive territory.
The Dow Jones Industrial Average fell 395.78 points, or 1.56%, to 25,017.44, the S&P 500 lost 45.54 points, or 1.66%, to 2,690.73 and the Nasdaq Composite dropped 219.40 points, or 3.03%, to 7,028.48.
Comments by New York Federal Reserve President John Williams on Monday that the US central bank is pushing ahead with gradual rate-hike plans next month as it marches toward a more normal policy stance may have added pressure to stocks.
Some investors questioned whether the Fed will be able to continue raising interest rates, possibly harming growth.
Richard Clarida, the Fed’s newly appointed vice chair, said on Friday that US rates are nearing Fed estimates of a neutral rate, which “makes sense.”
Over the weekend, Asia-Pacific leaders meeting in Papua New Guinea failed to agree on a communique for the first time, with US-China trade worries on the forefront.
US Vice-President Mike Pence said in a blunt speech on Saturday the United States will not back down from its trade dispute with China unless Beijing bows to US demands, dampening Friday’s trade optimism that was fueled by comments from President Donald Trump.
About 7.7 billion shares changed hands on US exchanges. That compares with the 8.7 billion daily average for the past 20 trading days. Declining issues outnumbered advancing ones on the NYSE by 2.72 to one; on Nasdaq, a 2.94-to-one ratio favored decliners.