Weakness in Tech Lowers Stocks 07/27 16:12
A slide in technology and consumer-oriented companies helped pull stocks
lower on Wall Street Tuesday, dragging the major indexes below the record highs
they set a day earlier.
(AP) -- A slide in technology and consumer-oriented companies helped pull
stocks lower on Wall Street Tuesday, dragging the major indexes below the
record highs they set a day earlier.
The S&P 500 fell 0.5%, snapping a five-day winning streak. The selling was
most pronounced in technology and communication stocks, and in companies that
rely on consumer spending. Traders shifted money into sectors seen as less
risky, including utilities, health care and in companies that make household
and personal goods.
Investors also bought bonds, sending the yield on the 10-year Treasury note
down to 1.24% from 1.27% late Monday. Long-term yields have eased off from
their sharp rise earlier in the year, but Wall Street is still worried about
Markets have been choppy as investors try to get a clearer picture of how
well the economy is recovering from the pandemic and how the Federal Reserve
will eventually ease up on its support for the economy. The central bank is
meeting Tuesday and will release its latest statement on Wednesday.
"The market is trying to find firmer footing on what to expect going
forward," said Alan McKnight, chief investment officer at Regions Asset
The S&P 500 index fell 20.84 points to 4,401.46. The Dow Jones Industrial
Average dropped 85.79 points, or 0.2%, to 35,058.52. The tech-heavy Nasdaq lost
180.14 points, or 1.2%, to 14,660.58.
Small company stocks also fell. The Russell 2000 index gave up 25.09 points,
or 1.1%, to 2,191.83.
Part of the uncertainty hovering over markets has to do with COVID-19 and
its potential impact on the recovery. Case numbers and hospitalizations have
been ticking higher in certain parts of the U.S. and world as the Delta variant
"The pace of growth is being questioned because of COVID-19 variants," said
Terry Sandven, chief equity strategist at U.S. Bank Wealth Management. "There
is some concern that the pace may not be as robust."
Investors also were monitoring a regulatory clampdown by China on various
companies. Chinese stocks fell again Tuesday after Beijing announced
enforcement measures on technology and real estate and was reported to be
considering restrictions on for-profit education ventures. Authorities say they
need to protect public safety and financial stability, restrain surging housing
costs and promote social welfare.
"In trying to understand the delta variant, what's going on in China, is it
a fundamental shift in the economic outlook, in the earnings outlook over the
rest of the year and the beginning of the year?" McKnight said. "We don't think
that it is, but we acknowledge that it creates volatility, particularly when
you've already had a large run this year."
Technology companies and a mix of consumer-oriented companies were among the
biggest losers Tuesday.
Wednesday's report from the Fed could give investors more clues about the
central bank's level of concern about inflation and when it might start
reducing its monthly bond purchases that have helped keep interest rates low.
Many companies that have reported quarterly results in recent weeks have
cited he impact of inflation on their costs. On Tuesday, General Electric and
Stanley Black & Decker mentioned higher costs.
"One of the big questions that the market is going to be answering over the
next couple of months: Are (companies) able to actually implement price
increases to cover the increase in costs?" McKnight said.
Investors considered a mixed bag of earnings from several large companies.
UPS slumped 7% after its revenue for the latest quarter fell short of analysts'
forecasts. Wall Street brushed off seemingly solid results from several other
companies. Tesla fell 2% and industrial conglomerate 3M fell 0.6%, despite
reporting solid financial results.
The Conference Board reported that consumer confidence edged higher in July,
marking the sixth straight month that the measurement has risen. The
International Monetary Fund said it expects the global economy to expand 6%
this year, a dramatic bounce-back from the 3.2% contraction in the pandemic
year of 2020.
The broad declines in the U.S. followed more drops in China. Hong Kong's
Hang Seng lost 4.2% and the Shanghai Composite lost 2.5%.
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