Nasdaq leads US stocks lower as mega-caps, chips slide

WALL STREET three major indexes all retreated more than 1% on Tuesday, with weakness in mega-cap growth companies such as Apple, Inc. and the chip sector weighing most on the Nasdaq ahead of this week’s crop of economic data and remarks from US Federal Reserve Chair Jerome Powell.

Tuesday’s economic data was a mixed bag showing slower US services industry growth in February as employment declined while a measure of new orders grew to a six-month high, signaling underlying strength in the sector.

The Purchasing Managers Index report on Tuesday confirmed continued economic growth despite 525 basis points worth of interest rate hikes from the Fed since March 2022.

Another survey showed new orders for US-manufactured goods dropped more than expected in January.

Some strategists saw the technology sell-off on Tuesday as the result of profit taking for a sector which had recently rallied after rising 56% in 2023.

Two reports helped to create a risk-off tone, said Craig Fehr, head of investment strategy at Edward Jones in St. Louis.

Apple shares finished down 2.8% after a research report showed iPhone sales in China fell 24% year on year in the first six weeks of 2024 as Apple faced increased competition from domestic rivals such as Huawei.

Also the chip sector was battered after Bloomberg News reported that Advanced Micro Devices hit a roadblock in its efforts to sell an artificial intelligence chip tailored for the Chinese market as Washington cracks down on advanced technology exports to Beijing.

Chip rivals fell in sympathy with the Philadelphia semiconductor index, which closed down 2%.

Mr. Fehr also attributed some of Tuesday’s weakness to recent rallies. The benchmark S&P 500 had hit a fresh intraday record high on Monday before closing slightly lower.

The Dow Jones Industrial Average fell 404.64 points or 1.04% to 38,585.19. The S&P 500 lost 52.30 points or 1.02% at 5,078.65, and the Nasdaq Composite dropped 267.92 points or 1.65% to 15,939.59.

Eight of the 11 major S&P 500 industry indexes declined, with technology ending down 1.2% and consumer discretionary falling 1.3%. Energy, up 0.7%, was the biggest gainer followed by consumer staples, which rose 0.3%.

Along with Mr. Powell’s testimony before lawmakers on Wednesday and Thursday, investors are also anxiously awaiting more clues about interest rate policy from economic data, including the crucial nonfarm payrolls report, due out on Friday.

Among mega-cap technology stocks, Tesla shares sank 3.9% after its European Gigafactory near Berlin halted production following a suspected arson attack.

On the bright side, Target shares rallied 12% after the retailer forecast annual comparable sales largely above estimates, betting on same-day services, product launches and a new membership program to boost spending.

Microstrategy shares tumbled 21% after the bitcoin development company announced a private offering for $600 million in convertible senior notes, with proceeds to be used to buy bitcoin.

Declining issues outnumbered advancers on the NYSE by a 1.40to-1 ratio; on Nasdaq, a 1.76-to-1 ratio favored decliners.

The S&P 500 posted 50 new 52-week highs and eight new lows; the Nasdaq Composite recorded 93 new highs and 113 new lows. —