By Will Horner, Caitlin McCabe and Xie Yu
Investors around the world retreated from stocks Tuesday as a
selloff in technology companies spread to other sectors of the
market, leading to broad declines across major U.S. indexes.
The Dow Jones Industrial Average tumbled about 550 points, or
1.6%, in recent trading, on pace for its worst one-day drop since
late January. The S&P 500 fell 1.1%. The Nasdaq Composite edged
down 0.4%, cutting its losses after falling as much as 2.2% earlier
in the day.
Investors have become increasingly concerned about signs of
inflation lately, forcing many money managers to pare their
positions in technology stocks. Growth stocks have traded lower for
most of the past week, with the Nasdaq Composite down nearly 5% for
Yet on Tuesday, the selloff extended to shares of more
economically sensitive companies as well, with all 11 sectors of
the S&P 500 trading lower. Companies including Occidental
Petroleum, Home Depot and Royal Caribbean posted declines of 3.5%
or more. Shares of large growth companies also tumbled, with Tesla
falling 2.5% and Apple dropping 1.4%.
The declines sent the Cboe Volatility Index, or VIX, known as
Wall Street's fear gauge, climbing higher as volatility returned to
the market. It traded as high as 23.73 intraday Tuesday, its
highest intraday value since March 10. The VIX has hovered below 20
for the past several weeks as the U.S. stock market has climbed to
The S&P 500 and Dow industrials set records as recently as
Friday after a lackluster jobs report for April sent stocks
climbing on hopes that the figures would further delay a tightening
of monetary policy in the future.
This week, however, concerns about inflation and supply chain
issues have spooked markets again.
Investors are betting that inflation is likely to climb steeply
in coming months, driven by pent-up spending as well as supply
bottlenecks and a leap in commodity prices. A sharp and sustained
jump in inflation would erode returns on fixed-income assets and
stocks whose valuations rely on future earnings. Some money
managers are concerned that it may also prompt the Federal Reserve
to pare back its easy money policies sooner than anticipated.
"Inflation is an issue that is on everyone's minds right now,
and it is injecting a lot of uncertainty," said Peter Langas, chief
portfolio strategist at Bessemer Trust. "The question is, how does
the Fed react to that?"
Technology and growth companies are bearing the brunt of
inflation concerns this year after leading the market's furious
rally since last spring. Investors are increasingly worried that
their high valuations may not be justified if inflation crimps the
value of future earnings.
This week, those concerns have spilled over to other sectors as
well, leading to a broader selloff.
"When inflation is rising quite rapidly and there is nothing
around to contain it, that is when equities don't tend to perform
well," said Seema Shah, chief strategist at Principal Global
Investors. "For the last 10 to 20 years, inflation hasn't been a
concern for investors and so, if you look at portfolios, they are
not positioned for inflation risks."
Google parent Alphabet was among the megacap tech stocks that
retreated Tuesday, falling 1.4%. Other technology companies also
declined: Semiconductor giant Intel lost 2.1%, while International
Business Machines fell 2.2%.
In corporate news, Novavax shares plummeted 12% after the
company said it delayed plans to seek regulatory clearance for its
Palantir Technologies was a rare bright spot, rising 6.9% after
the dating-mining-software specialist reported better-than-expected
revenue and gave a strong forecast.
Of the S&P 500's 11 sectors, the energy, financials and
industrials groups posted the steepest declines.
In bond markets, the yield on the 10-year U.S. Treasury note
edged up to 1.621%, from 1.601% on Monday, marking its third
consecutive trading day of gains. Yields rise as prices fall.
Overseas, the pan-continental Stoxx Europe 600 dropped 2%. In
Hong Kong, the Hang Seng Index fell 2%. Japan's Nikkei 225 slumped
3.1%, while South Korea's Kospi index retreated 1.2%.
Fresh data showed that factory-gate prices in China jumped last
month by the most in 3 1/2 years, adding to concerns about
inflationary pressures spreading globally.
Write to Will Horner at William.Horner@wsj.com, Caitlin McCabe
at firstname.lastname@example.org and Xie Yu at Yu.Xie@wsj.com
(END) Dow Jones Newswires
May 11, 2021 13:24 ET (17:24 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.