The News Herald (Willoughby, OH)
Tumble in tech stocks pulls down indexes
Technology stocks slammed into reverse and the losses overshadowed gains to send broad U.S. indexes lower.
NEW YORK » Technology stocks slammed into reverse on Monday, and the losses overshadowed gains in other areas of the market to send broad U.S. indexes lower.
Treasury bond prices and gold rose, meanwhile, as investors looked for safer places for their money following the latest escalation in the heated rhetoric between the United States and North Korea. Stock markets around the world were mixed after the leader of Europe’s largest economy retained her position, though her political strength may have weakened.
The Standard & Poor’s 500 index dropped 5.56 points, or 0.2 percent, to 2,496.66. The Dow Jones industrial average fell 53.50 points, or 0.2 percent, to 22,296.09, and the Nasdaq composite dropped 56.33, or 0.9 percent, to 6,370.59. Smaller stocks held up better than the rest of the market, and the small-cap Russell 2000 index rose 1.18, or 0.1 percent, to 1,451.96.
The day’s action was centered around the technology sector, and tech stocks in the S&P 500 lost 1.4 percent.
That’s more than three times the loss of any of the other 10 sectors that make up the index, and the losses were broad: Facebook fell 4.5 percent, Nvidia lost 4.5 percent and video-game developer Electronic Arts lost 3.6 percent.
Any stumble for tech this year has been notable given how much better it’s done than the rest of the market. Tech stocks in the S&P 500 have jumped 23 percent in 2017, double the S&P 500’s gain. They’ve been so successful that many hedge funds and other investors have bought them in hopes of riding the tide higher. But tech stocks’ success also means that they’re look more expensive than the rest of the market, relative to corporate profits.
“There have been a lot of dollars trafficking in these areas that have been winners the last year or so,” said Nate Thooft, senior portfolio manager at Manulife Asset Management. “As people get scared — as they see better opportunities elsewhere, or as they see someone else heading for the gates — it’s a bit of a self-fulfilling prophecy,” he said, where investors look to sell their tech stocks before everyone else does.
As investors moved out of tech stocks on Monday, some money flowed into areas of the market that haven’t done as well.
Energy stocks, which have been the worst performers in the S&P 500 this year, had the day’s strongest gains. Marathon Oil gained 3.1 percent, for example, and Noble Energy rose 2.7 percent.
They rose with the price of oil, which has been holding above $50 per barrel in recent days after spending most of the summer below that level. Benchmark U.S. crude rose $1.56 to settle at $52.22, and Brent crude, the international standard, jumped $2.16 to $59.02 a barrel.
Genuine Parts had the biggest gain in the S&P 500 after it said it would buy Alliance Automotive Group, a European distributor of auto parts, tools and workshop equipment. Genuine Parts valued the deal at $2 billion, including debt.
Genuine Parts gained $5.24, or 6 percent, to $93.22.
The stock market has been remarkably placid for much of this year, and the biggest move for the S&P 500 last week was a dip of just 0.3 percent.