By Caitlin Ostroff and Julia Carpenter
Technology stocks tumbled Monday, weighing on major indexes,
after the S&P 500 and Dow Jones Industrial Average ended last
week at records.
Stocks have ground higher in recent days after Federal Reserve
officials reiterated their commitment to easy financing conditions
to aid the economic recovery. President Biden also is proposing
additional fiscal spending. A weaker-than-expected jobs report on
Friday boosted optimism that the government and central bank are
likely to continue with supportive policies. But some money
managers are concerned that stocks' high valuations may mean the
rally will lose steam.
"Markets have come quite a long way and gone up a lot in a
relativity straight line," said Mike Bell, global market strategist
at J.P. Morgan Asset Management. "So the hurdle for further gains
becomes higher."
The S&P 500 lost 1%, after closing Friday at its 26th record
for this year. The Dow briefly crossed above the 35000 milestone
for the first time in intraday trading but finished lower by 0.1%.
The Nasdaq Composite fell 2.6%.
Tech stocks drove much of last year's market rally, a trend that
has reversed in 2021 as investors have piled into shares of value
stocks in the financial and energy sectors that tend to fare better
during an economic recovery.
"I'd say this is a fairly resilient market for the most place,
again with the exception of growth end of the spectrum, which is
telling," said Jennifer Ellison, principal at Bingham Osborn &
Scarborough. "We tend to get a shift in a trend when we have a
recession and then a new cycle starting. So not surprising at all
to see what was leading the markets in the last cycle now lagging
in this one."
Shares of semiconductor companies like Lam Research and Qorvo
were among Monday's decliners, falling roughly 7%. Micron
Technology fell 5.8%, and Align Technology lost 7.3%.
"They are seen as bellwether names for global growth," Quincy
Krosby, chief market strategist at Prudential Financial, said of
semiconductor companies. "In other words, if you look at all the
areas they're in -- 5G, cybersecurity, cloud, gaming -- it's so
broad. I think this is again consolidation, pulling back, allowing
the market to just consolidate."
Investors may be hesitant to put more money into technology
shares, which have become expensive, said Sebastien Galy, senior
macro strategist at Nordea Asset Management. Money managers are
increasingly betting on sectors such as banking, travel and leisure
that would benefit when the economy rebounds and more businesses
reopen.
Climbing commodity prices, supply-chain issues and chip
shortages are adding to producing costs, which are likely to feed
through to individual consumers and corporate profits, said Ipek
Ozkardeskaya, senior analyst at Swissquote Bank.
"From a market perspective, because everyone knows that
inflation is going higher, the real question is whether the rise in
inflation is going to be durable or not," Ms. Ozkardeskaya said.
"Inflation is a headwind for growth stocks. Value is going to be
more capable of carrying the weight of inflation on their
shoulders."
Concerns that higher inflation may erode the value of future
earnings is likely to be driving investors away from technology
stocks as well, traders said.
Prices of gasoline could continue to rise following the shutdown
of Colonial Pipeline's 5,500-mile pipeline from the Gulf Coast to
Linden, N.J. According to the AAA, gasoline prices could rise 3
cents to 7 cents a gallon this week in states most affected by the
shutdown.
"The immediate concern is: 'Are we going to have supply coming
up to the Northeast?'" Ms. Krosby said. "There's also a broader
concern -- and you'll see it in the market, too -- and that is,
'Who is responsible for this? Is this a couple hackers working in
an apartment somewhere in the world, or is this the work of a state
actor testing the U.S. and making it clear to everyone we do have
issues in terms of cybersecurity?'"
In other corporate news, Marriott International shares fell 4.1%
after the hotel chain said it swung to a loss for the first
quarter.
In bond markets, the yield on the 10-year Treasury ticked up to
1.601% from 1.576% Friday.
Overseas, the pan-continental Stoxx Europe 600 edged up
0.1%.
The British pound rose 1.4% against the dollar. The Scottish
National Party fell one seat short of an outright majority in the
country's parliament, prompting optimism that Scotland may avoid
holding another vote on splitting away from the U.K.
In Asia, South Korea's Kospi advanced 1.6% and the Shanghai
Composite Index added 0.3%. Japan's Nikkei 225 rose by 0.5%.
Australia's S&P/ASX 200 closed 1.3% higher as mining stocks
pulled the index to its first record since the onset of the
Covid-19 pandemic.
Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Julia
Carpenter at Julia.Carpenter@wsj.com
(END) Dow Jones Newswires
May 10, 2021 16:22 ET (20:22 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.