Tech Shares Lead Stocks Lower
September 23 2020 - 4:07PM
Dow Jones News
By Sam Goldfarb and Joe Wallace
U.S. stocks fell sharply Wednesday, extending their turbulent
run as hopes for additional fiscal stimulus dimmed, coronavirus
cases rose and investors continued to question the valuations of
tech stocks.
The S&P 500 was recently down 2.3%, following a rally of
more than 1% Tuesday. The Dow Jones Industrial Average fell around
2%, while the tech-heavy Nasdaq Composite dropped 2.9%.
Stocks have whipsawed this week: the S&P 500 briefly neared
correction territory Monday -- defined as a retreat of 10% from a
recent high -- only to rebound Tuesday. One bright spot on both
days was the technology sector, which showed signs of stabilizing
after dragging down indexes in previous weeks.
But traders were back in selling mode Wednesday, continuing to
lighten up on large tech stocks -- such as Apple, Google parent
Alphabet and Amazon.com -- that had powered the market higher over
much of the summer.
Putting further pressure on the sector, the Justice Department
submitted a proposal to Congress to curb longstanding legal
protections for internet companies and force them to shoulder more
responsibility for managing content on their sites.
Investors were also confronting the risk of a fresh wave of
coronavirus in Europe and an uptick in U.S. cases, helping pull
down stocks across a range of industries.
"Markets are really changing very rapidly their mind-set," said
Nadège Dufossé, deputy global head of multiasset at Candriam, an
asset manager based in Luxembourg.
The Federal Reserve's continued support to the economy should
help stocks, but the dwindling chances that lawmakers agree on a
new round of economic stimulus before November's election are
weighing on sentiment, Ms. Dufossé added.
Reflecting on tech stocks, many investors remain confident that
the fallout from the coronavirus pandemic will only accelerate
shifts to a more online world that will provide major benefits to
the sector. At the same time, worries have increased of late that
this year's rally may have stretched valuations to an unsustainable
level.
"Some of these names have risen so far so fast, I think that
people have to start doing the work and saying, 'Does it make sense
for all of these companies to be so strong?'" said Pete Santoro,
senior portfolio manager at Columbia Threadneedle.
Among individual companies, shares of Tesla fell 10% after Chief
Executive Elon Musk said it could take three years to fully realize
large reductions in battery costs, disappointing some investors.
Mr. Musk's target to produce 20 million vehicles a year also came
without a precise timeline or budget.
Shares of Nike surged 7.5% after the sportswear company said
sales rebounded over the summer. Shares of General Mills gave up
early gains to fall 0.5% after the Cheerios and Bisquick maker
reported stronger sales for its most recent quarter.
Surveys of U.S. purchasing managers indicated manufacturing and
service-sector activity kept expanding this month, though at a
slightly slower pace than in August.
Meanwhile, surveys of purchasing managers in Germany, France and
Japan showed resurgent coronavirus cases were pinching service
providers in Europe and Asia. The reports on overseas conditions by
data firm IHS Markit suggested a faltering end to the third quarter
for the global economy, though the manufacturing sector remained a
bright spot. The data suggested output may struggle to return to
pre-pandemic levels until a vaccine becomes widely available.
The House passed a short-term spending bill keeping the U.S.
government funded through Dec. 11, likely averting a partial
shutdown when the funding expires next Thursday.
Still, the focus in Congress has shifted this week to the
efforts to fill the late-Justice Ruth Bader Ginsburg's seat in the
Supreme Court, rather than reaching an agreement over a second
coronavirus-relief package, investors said.
Testifying before a congressional panel, Fed Chairman Jerome
Powell repeated his view that more government spending would allow
the Fed to more quickly meet its goals of a healthy labor market
and 2% annual inflation.
U.S. government bonds remained in a narrow range. The yield on
10-year Treasury notes edged up to 0.676% from 0.663% Tuesday. The
WSJ Dollar Index gained 0.6%, climbing for a fourth day.
U.S. crude-oil for November delivery gained 0.3% to $39.93 a
barrel. Gold futures dropped 2% to $1859.90 a troy ounce.
Overseas markets were mixed. The Stoxx Europe 600 rose 0.6%,
while China's Shanghai Composite Index edged up 0.2% and Japan's
Nikkei 225 closed slightly lower.
Write to Sam Goldfarb at sam.goldfarb@wsj.com and Joe Wallace at
Joe.Wallace@wsj.com
(END) Dow Jones Newswires
September 23, 2020 15:52 ET (19:52 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.