S&P 500 slips as tech stocks pull market lower

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FILE PHOTO: The Wall Street sign is pictured at the New York Stock exchange (NYSE) in the Manhattan borough of New York City

By Herbert Lash

NEW YORK (Reuters) – The S&P 500 closed lower on Wednesday as optimism about the economic recovery by Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen was unable to halt a decline in technology shares for a second straight day.

The remarks by the top two U.S. economic officials mirrored what they told Congress the day before, with Powell saying on Wednesday the most likely case is 2021 will be “a very, very strong year.”

While the three major indexes closed lower, investors sold last year’s big performers, the technology shares that doubled the Nasdaq index from year-ago lows, and bought the underpriced value-oriented stocks poised to do well in the recovery.

Wall Street has seesawed this week as a months-long rotation into economically sensitive energy and financial shares, which have gained on an outlook for economic growth, was briefly upended by falling bond yields that prompted beaten-down technology stocks to rise.

The 10-year yield fell to about 1.6%, a slide that in recent days had propped up tech stocks that rely on low-cost capital. Value-oriented shares on Wednesday closed flat, outpacing a 1.4% decline in growth stocks, which include tech shares.

Investors have focused on the yield on the benchmark 10-year Treasury note, pondering whether there is room for long-term interest rates to run, said David Kelly, chief global strategist at JPMorgan Asset Management.

“We’re in a little bit of a lull here. We know that the economy is primed to begin to really accelerate in the second quarter,” Kelly said. “But we haven’t seen that acceleration yet so that’s what we’re waiting for.”

Adding to an upward bias for most of the session was data showing U.S. factory activity picked up in early March amid strong growth in new orders. But supply chain disruptions continued to exert cost pressures on manufacturers, keeping inflation fears in focus.

“Everybody’s bullish about the prospects of a recovery right now,” said David Yepez, lead equity analyst and portfolio manager at Exencial Wealth Advisors. “In order for the market to bottom we need to have more fear, and I don’t feel like the market has fear right now.”

Financials gained 0.4% and industrials rose 0.7%, while energy jumped 2.5% as crude prices rebounded from a 6% fall in the last session. [O/R]

The Dow Jones Industrial Average fell 3.09 points, or 0.01%, to 32,420.06. The S&P 500 lost 21.38 points, or 0.55%, to 3,889.14 and the Nasdaq Composite dropped 265.81 points, or 2.01%, to 12,961.89.

Volume on U.S. exchanges was 12.72 billion shares, compared with the 14.0 billion average for the full session over the last 20 trading days.

Apple Inc, Tesla Inc, Amazon.com Inc, Facebook Inc and Microsoft Corp led decliners on the S&P 500 and the Nasdaq.

Intel Corp retreated 2.3% after earlier gains as the company, in its efforts to expand chipmaking capacity, announced plans to spend as much as $20 billion to build two factories in Arizona and open its factories to outside customers.

U.S.-listed shares of Taiwan Semiconductor dropped 5.2%, while semiconductor equipment makers Lam Research Corp, Applied Materials Inc and ASML Holding rose. Applied Materials was the third-biggest boost on the S&P 500, after oil giants Chevron Corp and Exxon Mobil Corp.

Bitcoin gained after Tesla’s founder, Elon Musk, said the company’s electric vehicles can now be bought using bitcoin and the option will be available outside the United States later this year.

GameStop Corp tumbled 33.8% after the videogame retailer said it might cash in on a meteoric rise in its share price to fund its e-commerce expansion.

Declining issues outnumbered advancing ones on the NYSE by a 1.32-to-1 ratio; on Nasdaq, a 3.17-to-1 ratio favored decliners.

The S&P 500 posted 15 new 52-week highs and no new lows; the Nasdaq Composite recorded 42 new highs and 128 new lows.

(Reporting by Herbert Lash in New York; Additional reporting by Devik Jain and Medha Singh in Bengaluru; Editing by Maju Samuel and Matthew Lewis)

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