Tech Stocks Drop as Dow, S&P 500 Fall in Volatile Session
U.S. stock indexes moved lower and a selloff in technology stocks deepened as investor concerns about economic growth and rising interest rates continued to weigh on markets.
The S&P 500 fell 1.2% Tuesday afternoon. The Dow Jones Industrial Average lost 0.2%, while the tech-heavy Nasdaq Composite slid 2.6%.
Investors are considering a range of signals as they try to map out the trajectory of the U.S. economy. Many have grown worried that the Federal Reserve’s plans for monetary tightening to tamp down inflation could tip the economy into a recession.
Tuesday’s losses point to a sharp retreat from Monday, when major U.S. indexes rallied after a volatile trading session the previous week. But a late-Monday profit and revenue warning from social-media company
soured investor sentiment again. A disappointing report Tuesday showing slower U.S. new-home sales in April further dimmed the mood.
Snap’s shares fell 42% Tuesday afternoon as investors digested comments that the macroeconomic environment has deteriorated more than expected. Worries about disruptions to Snap’s advertising revenue rippled to other tech stocks that have been battered this year.
shed 9.6% and Google parent
fell 6.7%.
Meanwhile, the home-sales data, well below economists’ expectations, is another sign that the Fed’s interest-rate increases are already slowing the real economy, said
Steven Ricchiuto,
the chief economist for
Securities USA.
“It’s a pretty weak number,” he said, saying the trend is a sign that more home buyers are getting squeezed out of the market as the interest rates on mortgages increase.
Worries about slowing growth amid higher inflation have been among the catalysts that sent the S&P 500 falling 17% through Monday from its January high. Investors are now keeping a close watch on whether the S&P 500 enters bear-market territory, defined as a drop of at least 20% from a recent high. On Friday, the benchmark index came close to finishing in a bear market before it was saved by a late-session rally.
On Tuesday, as big tech companies took a drubbing, stocks with more of a foothold in the physical economy sustained narrower losses or gains. The consumer-staples, packaged-foods and utilities sectors of the S&P 500 were the only three of the index’s 11 components in positive territory.
Tim Courtney,
chief investment officer at Exencial Wealth Advisors, took that as a sign that inflation, and the Fed’s response, remained a bigger worry for many investors than the economy’s fundamental health.
Wealth-management clients had been taking the stock market’s downturn in stride this year, but as bear-market levels have approached for the S&P 500, their fear has built, Mr. Courtney said.
“The last week, as we’ve approached that magical bear-market barrier, I think the concerns started rising,” he said.
Disappointing earnings and warnings across the corporate landscape have exacerbated the fears.
became the latest retailer Tuesday to dent investor sentiment after it swung to a first-quarter loss amid higher costs. The company’s shares tumbled 31%.
Mizuho’s Mr. Ricchiuto warned that as more analysts come to terms with the Fed’s strong resolve to control inflation, Wall Street’s expectations for corporate earnings could further weaken, sending stock prices even lower.
There have been glimmers of optimism, however. On Monday,
said U.S. consumers appear to be in good financial health. But that sanguine depiction was quickly counterbalanced by the disclosure from Snap, a company that had never issued a revenue warning before.
“We’re going to have this roller-coaster ride for some time, as investors cling onto more-optimistic data points and get fresh disappointment when there’s another downbeat reading coming through,” said
Susannah Streeter,
senior investment and markets analyst at Hargreaves Lansdown. “We don’t yet know the full path of interest-rate rises or how resilient consumers will be.”
Despite Tuesday’s broad technology selloff, there were bright spots in the market.
was up 4.6% after the videoconferencing services company raised its profit outlook.
Tuesday’s selloff in technology stocks sent investors scooping up government bonds, with the yield on the benchmark 10-year U.S. Treasury note falling to 2.756%, from 2.857% Monday. A bond’s yield…
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