NVDA NVIDIA Corporation

By David Hodari 

U.S. stocks opened lower Tuesday, extending the latest wave of selling as pressure intensified on the global technology sector.

The Dow Jones Industrial Average fell 440 points, or 1.7%, to 24582 shortly after the opening bell. The S&P 500 dropped 1.1% and the Nasdaq Composite declined 2.2%. The Nasdaq slumped 3% Monday, closing near a seven-month low, with tech-giant Alphabet slipping into bear-market territory.

In Europe, the pan-continental Stoxx Europe 600 index fell 0.8% in early afternoon trading, with the index's tech sector leading the way down, descending 2.5% to its lowest level in 18 months.

Selling in the European auto sector echoed similar losses in Asia. Renault shares dropped 2.6% after Mitsubishi Motors and Nissan slipped 6.9% and 5.5% respectively, following the arrest of Nissan Chairman Carlos Ghosn. Nissan, which has a strategic partnership with both Mitsubishi and Renault, said Monday that it intended to oust Mr. Ghosn after an internal probe concluded he had under reported his pay. On Tuesday, France said it was asking Renault to look for interim leadership while Mr. Ghosn is under arrest.

Falling automotive stocks combined with the pressure on Asia-Pacific technology equities to send share prices across the region tumbling.

Japan's Nikkei index was down 1.1%, while the Shanghai Composite Index and Hong Kong's Hang Seng both fell around 2%. The tech-heavy Shenzhen A-Share dropped 2.7%.

Lower-than-expected demand for Apple's new iPhones and the company's expansion of its product offerings have put a strain on its supply chain, making it harder for the company to forecast the number of necessary components.

Shares in screen manufacturer Japan Display -- one of the Apple suppliers to have recently cut its quarterly profit estimates -- were down 10.3% Tuesday.

Adding to the downbeat mood in the tech sector, Chinese officials said they had found widespread evidence of anticompetitive behavior. Beijing investigators cited a price-fixing probe into South Korean firms Samsung Electronics, down 2%, and SK Hynix, down 3.3%. U.S.-based Micron Technology was also implicated in the reports, and its shares fell 5.5% in premarket trade.

Despite those developments, computer hardware firms have still outperformed the broader tech sector so far this year. The S&P 500 technology hardware and equipment basket has climbed 8.7% in 2018, versus 3.8% for the index's broader tech sector.

A combination of soft earnings forecasts from sector giants like Apple and Facebook, anxieties that corporate earnings may have peaked and frosty trading relations between the U.S. and China have left tech stocks vulnerable to selling, surprising investors.

"The tech sector, especially in the U.S. is more exposed to political and regulatory risk than a lot of investors were prepared for," said Jared Woodard, global investment strategist at Bank of America Merrill Lynch.

With the November BAML Fund Managers survey revealing the largest drop in allocation to tech in October since the financial crisis, investors were eyeing the prospective meeting between President Trump and China's President Xi, expected at the Group of 20 summit in Buenos Aires later in November, for any signs that a trade deal might be negotiated.

"The trade conflict is a tech arms race and something not likely to be resolved in any major way in the near term. We suggest more pain for financial markets is likely possible for consumers before either party makes concessions," Mr. Woodard said.

The course of global economic growth and political risk during the first months of 2019 could also determine whether Chinese giants like Baidu, Alibaba Group and Tencent Holdings take an even bigger hit next year, say strategists.

"Big Chinese tech companies haven't been generating the amount of revenue they were previously. They've been loading up on debt instead and that plays into other areas of credit concern for China," said Frances Hudson, a global strategist at Aberdeen Standard Investments. "It could come back to bite them depending on how the world moves next year."

Aside from ongoing trade tensions between the world's two largest economies, market participants were also watching Brexit negotiations between U.K. and European Union lawmakers. U.K. Prime Minister Theresa May continued to fight to save the deal she negotiated with the EU while also defending her grip on power against a potential confidence vote by fellow members of Parliament.

In commodities, the price of Brent crude oil fell 0.8% to $66.26 a barrel -- extending its month losses to more than 17% -- while gold was up 0.1% at $1,226.70 a troy ounce.

In cryptocurrency markets, bitcoin plunged 16% to $4,395.46 according to CoinDesk, its lowest price since October 2017.

Write to David Hodari at David.Hodari@dowjones.com

(END) Dow Jones Newswires

November 20, 2018 09:49 ET (14:49 GMT)

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