A third straight bludgeoning for tech stocks drives Nasdaq to 3-week closing low

Bloomberg News

Investors continued to dump Facebook shares.

An unraveling of popular technology bets on Monday, marked by a third straight session in the red, helped to push the tech-laced Nasdaq Composite Index to its lowest close in more than three weeks.

How did the main benchmarks fare?

The Nasdaq Composite Index

COMP, +0.65%

shed 107.41 points, or 1.4%, to 7,630, marking the lowest close for the benchmark, which maintains a heavy proportion of tech and internet-related names, since July 5, according to WSJ Market Data Group.

The S&P 500

SPX, +0.64%

gave up 16.22 points, 0.6%, to 2,802.60, with technology stocks by far the weakest industry, down 1.8%, among the broad-market benchmark’s 11 sectors. Meanwhile, the Dow Jones Industrial Average

DJIA, +0.45%

fell 144.23 points, or 0.6%, to 25,306.83, pressured by declines by payments processors Visa Inc.

V, +0.39%

 and American Express Co.

AXP, +0.36%

which led losers among the blue-chip benchmark’s 30 components.

Read: The fate of the stock market for 2018 could rest on the next couple of days

What drove the markets?

Tech names have been staging a steady retreat, particularly among the so-called FAANG names— Facebook Inc.

FB, +0.59%

Apple Inc.

AAPL, +0.42%

Amazon.com Inc.

AMZN, +1.24%

Netflix Inc.

NFLX, -1.12%

and Google Inc.-parent Alphabet Inc.

GOOG, +0.57%

GOOGL, +0.76%

Much of the carnage over the past three sessions has coincided with Facebook Inc.’s historic fall on a disappointing revenue outlook last week. Facebook saw its shares on Monday fall by 2.2%, a sufficient retreat to push shares of the social-media giant officially into bear-market territory. It has lost more than 20% from a recent peak hit on July 25.

That said, some market bulls have taken solace in the fact that major benchmarks remain in positive territory for the month, with one trading session remaining in July.

The S&P is up 3.1% for the month to date, representing its largest such rise since January, while the Dow and Nasdaq are higher by 4.3% and 1.6%, respectively.

Read: The fate of the stock market for 2018 could rest on the next couple of days

Looking ahead, Apple Inc.’s report late Tuesday may be key to renewing investors optimism, as Wall Street has seemingly shaken off worries about tariff clashes between the U.S. and its global partners to focus on quarterly results.

Check out: Earnings Watch—Even Apple takes a back seat to Elon Musk right now

What were strategists saying?

“Generally speaking we’re seeing earnings come through in spectacular fashion. The beats have been significant, just off the charts. And while we’re not the cheapest region, underlying fundamentals remain extremely strong in the U.S., which should continue to support us,” said Michael Mullaney, director of global market research at Boston Partners.

Despite that, Mullaney suggested that valuations for technology stocks had gotten overextended.

“The market is punishing companies that don’t beat on revenue or earnings, or which give a bad outlook. You need to win on all three to do well, and if you miss, like Facebook did, you get pummeled.”

Don’t miss: Why investors shouldn’t sweat the stock market’s reliance on FAANG shares

Which stocks were in focus?

Shares of Caterpillar Inc.

CAT, -0.07%

 reversed earlier gains to fall 2% after the Dow component reported second-quarter earnings that beat expectations and raised its full-year outlook.

Tyson Foods Inc.’s

TSN, -0.50%

 stock sank 7.6% after it gave a cautious full-year earnings outlook, citing uncertain trade policies and higher tariffs.

First Data Corp.

FDC, +0.17%

 shares gained 3.2% after it reported second-quarter earnings and revenue that topped expectations.

Juniper Networks Inc.’s

JNPR, -0.15%

 stock rose 0.5% after Deutsche Bank upgraded the stock to buy and raised its price target to $32 from $25.

U.S. Foods Holding Corp.

USFD, +2.78%

 shares tumbled by 18% after it agreed to buy Services Group of America’s five operating companies for $1.8 billion in cash.

Fossil Group Inc.shares

FOSL, +4.77%

 has entered into a licensing agreement with Bayerische Motoren Werke Aktiengesellschaft for BMW-branded watches and smartwatches through 2023. Shares rose 2.5%.

CBS Corp.’s stock

CBS, +0.69%

lost 5.1%, following a sharp drop on Friday on news that the media company’s board would investigate allegations of personal misconduct by CEO Les Moonves. Some board members discussed over the weekend whether Moonves should step aside, after a New Yorker article late Friday reported that six women have come forward saying he sexually harassed them over a period spanning three decades.

What were other markets doing?

European stocks

SXXP, +0.00%

were down across the board, while Asian markets closed with losses.

U.S. oil futures

CLU8, -0.40%

rallied to end above $70 a barrel, as gold futures 

GCQ8, -0.44%

logged their third straight loss and the ICE U.S. Dollar Index

DXY, +0.17%


Which economic reports were in focus?

U.S. pending home sales rose 0.9% in June, the National Association of Realtors said Monday, a tick better than had been anticipated.

Check out: MarketWatch’s Economic Calendar

On the Federal Reserve front, policy makers are slated to begin a two-day meeting on Tuesday. Economists expect it won’t raise interest rates, but see it issuing a statement Wednesday making it clear that more rate increases are coming. Two more rate increases this year have been signaled, but the first isn’t expected until September.

Other central banks are holding meetings this week: The Bank of Japan is expected to adhere to its current monetary policy at its July 30-31 meeting, while the Bank of England is expected to lift interest rates on Thursday in only its second hike in a decade.

Don’t miss: Why investors will be keeping close watch on the Bank of Japan

-—Victor Reklaitis contributed to this article

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