Wall Street drops as high-flying tech stocks retreat

Wall Street drops as high-flying tech stocks retreat

News: Wall Street drops as high-flying tech stocks retreat.

(Reuters) – The Nasdaq ended significantly lower on Wednesday after investors sold soaring tech stocks and focused on sectors more likely to benefit from an economic recovery due to fiscal stimulus and vaccination programs.

Microsoft Corp, Apple Inc, and Amazon.com Inc fell, weighing more than any other stock in the S&P 500.

The S&P 500 indices for the financial and industrial sectors hit record highs within a day. Most of the other S&P 500 sectors declined.

The Russell 1000 value index, which relies heavily on economy-related sectors, rose while its growth index, which included large technology companies, lost ground.

“Today is the perfect roundup of the big theme we’ve seen in the past few months: Vaccine rollout is going well and the economy is improving. This is leading to higher returns and rate expectations, which is hurting growth stocks.” said Baird investment strategist Ross Mayfield in Louisville, Kentucky.

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Unofficially, the Dow Jones Industrial Average fell 119.08 points, or 0.38%, to 31,272.44, the S&P 500 fell 50.46 points, or 1.30%, to 3,819.83, and the Nasdaq Composite fell 361.04 Points or 2.7% to 12,997.75.

The recovery of the US economy continued at a modest pace in the first few weeks of this year. Businesses were bullish about the months ahead and housing demand “robust” but only slowly improving in the job market, the Federal Reserve reported.

While vaccine distribution is expected to benefit the economy, data showed that US private employers hired fewer workers than expected in February, suggesting the labor market struggled to regain traction.

Another report showed that US service industry activity slowed unexpectedly in February amid winter storms, while a measure of the prices companies paid for supplies rose to its highest level in nearly 12 1/2 years.

The US 10-year Treasury yield rose to 1.47%, putting pressure on high valuation areas of the market. It was still last week’s high of over 1.61% that shook equity markets as investors bet on rising inflation.

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

“There is a significant headwind in equity markets when returns are above 1.5%, with most investors keeping an eye on the pace of return growth,” said Michael Stritch, chief investment officer, BMO Wealth Management.

President Joe Biden’s $ 1.9 trillion coronavirus relief proposal would expire $ 1,400 to high-income Americans as part of a compromise with moderate Democratic senators, according to lawmakers and media reports.

Exxon Mobil Corp surged after the oil major announced plans to increase dividends and curb spending with less bold projections than in previous years.

(This story corrected to show that the S&P 500 energy index did not hit a record high.)

Reporting by Noel Randewich in Oakland, California; Additional coverage from Shashank Nayar and Medha Singh in Bengaluru; Editing by Lisa Shumaker

Original Source © Reuters

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