Weakness in Big Tech leads stocks lower
Bond yields continue to march higher
NEW YORK, Sept 28, (AP): Stocks fell broadly on Wall Street Tuesday as bond yields continued marching higher and put more pressure on big technology companies.
The S&P 500 fell 1.4% as of 10:10 a.m. Eastern. The Dow Jones Industrial Average fell 350 points, or 1%, to 34,519 and the Nasdaq fell 2%.
Bond yields continued rising. That tends to draw money out of sectors like technology with lofty valuations. The yield on the 10-year Treasury rose to 1.55%, the highest since late June. It was at 1.48% late Monday.
Chipmaker Nvidia fell 3.7% and Microsoft fell 2.6%. The broader technology sector has also been contending with a global chip and parts shortage because of the virus pandemic and that could get more severe as a power crunch in some parts of China shuts down factories.
Communications companies also weighed down the market. Facebook fell 3.3% and Google’s parent company, Alphabet, fell 3.7%.
Energy stocks rose. Exxon Mobil rose 1.6% and Cabot Oil & Gas rose 1.3%. Another lingering market worry resonating from China is the possible collapse of one of China’s biggest real estate developers. Evergrande Group is struggling to avoid a default on billions of dollars of debt.
Markets in Asia were mixed while markets in Europe fell.
Investors have been dealing with a choppy market in September as they try to gauge how the economic recovery will progress and how it will impact various industries. The S&P 500 is down 3.3% so far in September and is headed for its first monthly loss since January.
COVID-19 remains a lingering threat and is still taking its toll on businesses and consumers. Economic data on consumer spending and the employment market has been mixed. Companies are warning that supply chain problems and higher prices could crimp sales and profits.
France’s CAC 40 declined 1.4% in early trading to 6,561.06. Germany’s DAX slipped 0.8% to 15,443.31. Britain’s FTSE 100 shed 0.4% to 7,035.80. U.S. shares were set for a retreat, with the future for the Dow Industrials down 0.4% to 34,617.00. The S&P 500 future lost 0.7% to 4,404.25.
In Asia, Japan’s benchmark Nikkei 225 lost 0.2% to finish at 30,183.96. Australia’s S&P/ASX 200 slipped 1.5% to 7,275.60. South Korea’s Kospi declined 1.1% to 3,097.92. Hong Kong’s Hang Seng added 1.2% to 24,500.39. The Shanghai Composite index climbed 0.5% to 3,602.22.
A power crunch in some parts of China has shut down factories and left some households without electricity under an effort to meet official energy use targets. That could have global repercussions, including on supplies needed for manufacturing throughout Asia, coming right ahead of the yearend shopping season.
That’s on top of parts and raw material shortages that already ail regional manufacturing because of supply disruptions caused by the coronavirus pandemic.
Analysts say the power shortage in China could become prolonged as the demand for coal and natural gas surges during the winter.
Another lingering market worry resonating from China is the possible collapse of one of China’s biggest real estate developers, Evergrande Group, which is struggling to avoid a default on billions of dollars of debt.
“Crucially, contagion risks loom large due to transmission within the property sector due to similar risks to home-buyers and banks via balance sheet exposures,” said Vishnu Varathan of the Asia & Oceania Treasury Department at Mizuho Bank. “Fact is Evergrande is at best a risk that has temporarily abated but is far from abolished.”
The vote for the leader of Japan’s ruling party, set for Wednesday, was also weighing on Tokyo trading, according to analysts, as players took a wait-and-see attitude. Four candidates are in the race to replace Prime Minister Yoshihide Suga, who is stepping down after a year in office. No major economic or foreign policy changes are expected, as the pro-U.S. Liberal Democratic Party has ruled Japan almost continually in recent decades.
Consumer spending has been the key driver for the economic recovery and it has been crimped in part by rising cases of COVID-19 because of the highly contagious delta variant, which remains a huge concern in Asia.
In energy trading, benchmark U.S. crude added 73 cents to $76.18 a barrel in electronic trading on the New York Mercantile Exchange. It gained $1.47 to $75.45 per barrel on Monday.