Wall Street drops as high-flying tech equities retreat

THE NASDAQ ended sharply lower on Wednesday after investors sold high-flying technology shares and pivoted to sectors viewed as more likely to benefit from an economic recovery on the back of fiscal stimulus and vaccination programs.

Microsoft Corp., Apple, Inc. and Amazon.com, Inc. dropped more than 2%, weighing more than any other stocks on the S&P 500.

The S&P 500 financial and industrial sector indexes reached intra-day record highs. Most other S&P 500 sectors declined.

“Today is the perfect encapsulation of the big theme we’ve been seeing in the past couple of months: The vaccine rollout is going well and the economy improving, and that is sending yields and rate expectations higher, which is hurting growth stocks,” said Baird investment strategist Ross Mayfield, in Louisville, Kentucky.

The Dow Jones Industrial Average fell 0.39% to end at 31,270.09 points, while the S&P 500 1.31% to 3,819.72.

The Nasdaq Composite dropped 2.7% to 12,997.75. That left it at its lowest since early January and reduced its gain in 2021 to less than 1%.

The US economic recovery continued at a modest pace over the first weeks of this year, with businesses optimistic about the months to come and demand for housing “robust,” but only slow improvement in the job market, the Federal Reserve reported.

While the vaccine distribution is expected to help the economy, data showed US private employers hired fewer workers than expected in February, suggesting the labor market was struggling to regain speed.

Another report showed US services industry activity unexpectedly slowed in February amid winter storms, while a measure of prices paid by companies for inputs surged to the highest level in nearly 12-1/2 years.

The US 10-year Treasury yield ticked up to 1.47%, pressuring areas of the market with high valuations. It was still off last week’s peak of above 1.61% that roiled stock markets as investors bet on rising inflation.

Rising interest rates disproportionately hurt high-growth tech companies because investors value them based on earnings expected years into the future, and high interest rates hurt the value of future earnings more than the value of earnings made in the short term.

Exxon Mobil Corp. rose 0.8% after the oil major unveiled plans to grow dividends and curb spending with projections that were less bold than previous years.

Declining issues outnumbered advancing ones on the New York Stock Exchange (NYSE) by a 1.31to-1 ratio; on Nasdaq, a 1.95-to-1 ratio favored decliners.

The S&P 500 posted 62 new 52-week highs and no new lows; the Nasdaq Composite recorded 284 new highs and 68 new lows.

Volume on US exchanges was 14 billion shares, compared with the 14.9 billion average for the full session over the last 20 trading days. —