U.S. stocks fell Tuesday with last week’s slide in giant
technology stocks resuming after the Labor Day holiday and a fall in oil prices
punishing energy stocks.
The tech-heavy Nasdaq Composite Index slumped 2.6%,
extending its losses over the past three sessions to more than 8%. The S&P
500 fell 1.8%, and the Dow Jones Industrial Average lost 400 points, or 1.4%.
Among the tech stocks declining were those that have driven
much of the market’s gains this year and have benefited from the stay-home
orders aimed at slowing the coronavirus pandemic.
Apple retreated 3.7%, Amazon.com declined 3% and Facebook
fell 2.7%. Video-chat software company Zoom Video Communications fell 2.4%.
All four stocks are still up more than 30% for the year,
while the Nasdaq Composite is holding on to a 22% gain. In both Friday’s and
Tuesday’s sessions, the index had approached correction territory—a drop of 10%
of its recent high—before recovering slightly. The S&P 500 information
technology sector was down more than 9% from its record last Wednesday, also
putting it near a correction.
“I think we should start to anticipate a rotation, the
momentum behind tech is going to ease,” said Seema Shah, chief strategist at
Principal Global Investors.
“As we’re seeing easing lockdowns and the prospect of a
vaccine, people are beginning to go back to a more normal way of life and
reliance on tech is starting to fade from the peak where it was at the height
of the lockdown.”
Tesla shares, meanwhile, fell 17% after S&P Dow Jones
Indices late Friday passed over the electric car maker for inclusion in the
S&P 500, which many investors had bet would give the shares another lift.
As traders return from the holiday weekend that typically
signals the end of summer breaks, the economy and the U.S. election will be in
focus, as well as the continuing pandemic. The selloff in the S&P 500 was
broad based, with every sector in the red and the energy sector the worst
performer.
“Typically, bubbles are unwound when the Fed takes away the
punch bowl. Obviously, this is very unlikely to happen anytime soon,”
strategist Chris Senyek of Wolfe Research wrote Tuesday. “However, this bubble
can still be unwound by sustained economic disappointments!”
Oil prices extended their drop on concerns demand is
slumping amid a still uneven economic recovery. Saudi Arabia signaled an
expectation for reduced demand over the weekend by cutting prices. Brent crude,
the global oil benchmark, fell 5.1% to $39.85 a barrel, dropping below $40 for
the first time since June. U.S. crude dropped 7.6%.
Among the worst-performing stocks in the S&P 500 were
energy companies Apache and Devon Energy, which both lost about 8%.
Some investors sought safety in government bonds, pulling
the yield on the benchmark 10-year Treasury notes down to 0.680% from 0.720%
Friday.
Also weighing on markets was an uptick in economic tensions
between the U.S. and China.
President Trump said in a Monday press conference that he
was considering “decoupling” from China and wasn’t seeking to bring outsourced
jobs back to the U.S. The comments are the latest twist in a multiyear spat
between the two largest economies in the world that have centered around
technology, security and jobs.
“Decoupling is an economic concept, not a political
concept,” said Sebastien Galy, a macro strategist at Nordea Asset Management.
“These have the potential to be very significant moves.”
Chinese Foreign Minister Wang Yi unveiled an initiative on
Tuesday seeking to set global standards on data security, in response to
accusations by Washington over what the Trump administration deems to be
national-security threats by Chinese companies such as Huawei Technologies and
Tencent Holdings.
In Asia, major benchmarks rose, with the Shanghai Composite
Index and Korea’s Kospi index both closing up 0.7%. Japan’s Nikkei 225 ticked
up 0.8% after the government released its revised gross domestic product
figures for the second quarter, which were moderately better than economists’
expectations.
The pan-continental Stoxx Europe 600 closed down 1.15% as
another round of Brexit trade negotiations between the U.K. and the European
Union are set to begin on Tuesday. Prime Minister Boris Johnson has set an Oct.
15 deadline to strike a deal and tensions are expected to simmer in the final
weeks ahead of the deadline. The pound weakened 0.8% against the euro.
“Sterling is definitely under short-term pressure,” said
Russell Silberston, investment strategist at Ninety One. “If the range of
possible outcomes suggests we are going to move toward a hard Brexit, I
wouldn’t be surprised to see the euro rally and the sterling fall.”
Apple reached a staggering $2 trillion market valuation in
August, despite years of doubt from critics over whether the tech giant could
continue to succeed after the death of Steve Jobs. Here’s a look at Apple’s
rise to the very top. Illustration: Jacob Reynolds/WSJ
Bucking the downward trend, shares of General Motors jumped
10% after it formed a strategic partnership with battery and hydrogen-powered
vehicle maker Nikola to jointly develop an electric truck. Nikola shares surged
nearly 50%.
Among other individual moves, Boeing fell 4.6% after The
Wall Street Journal reported Federal safety regulators are reviewing production
of its 787 Dreamliner.
Fitness company Peloton Interactive rose 12% after unveiling
new bikes and lower prices, trying to capitalize on more home workouts.
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