Tech rout punishes stocks as Treasuries surge
A steep, late-afternoon sell-off in technology companies pulled stocks sharply lower Tuesday, knocking 344 points off the Dow Jones industrial average.
The market slide erased modest gains from earlier in the day and much of a powerful rally from the day before.
Banks also weighed on the market as bond yields declined. Investors bid up shares in safe-play stocks like utilities and real estate companies.
The market turbulence came a day after the major stock indexes notched their best day in more than two years following a steep slide last week.
"Just looking at the sector performance indicates to me this is a flight-to-safety kind of trade day," said Sam Stovall, chief investment strategist at CFRA. "Until we get better guidance as to whether this correction is truly over, we will take a very choppy rise possibly to new highs a few months down the road."
The Standard & Poor's 500 index fell 45.93 points, or 1.7 percent, to 2,612.62. The Dow tumbled 344.89 points, or 1.4 percent, to 23,857.71. The 30-company average had been down 493 points. A day earlier, it climbed 669 points.
The tech-heavy Nasdaq slid 211.74 points, or 2.9 percent, to 7,008.81. The Russell 2000 index of smaller-company stocks gave up 30.15 points, or 2 percent, to 1,513.57.
AT THE CLOSE: Stocks reversed course and posted red ink Tuesday, with the Dow Jones Industrial Average plunging more than 300 points, as technology names such as Twitter and Facebook dragged on the market. https://t.co/kWm2XtcGSl pic.twitter.com/XHbMrluuSI— FOX Business (@FoxBusiness) March 27, 2018
The major stock indexes appeared headed for more gains early Tuesday after their strong finish on Monday, but the rally didn't last. Stocks wavered through much of the morning, recovered somewhat by early afternoon, but then veered sharply lower as investors sold shares in Nvidia, Twitter, Facebook and other technology companies.
Nvidia tumbled more than any other stock in the S&P 500 on published reports that the company has temporarily stopped testing its technology for self-driving cars in the wake of a deadly collision last week in Tempe, Ariz., involving an Uber autonomous vehicle and a pedestrian. The chipmaker's shares lost $18.96, or 7.8 percent, to $225.52.
Microsoft, which outgained all the other companies in the S&P 500 Monday, gave up $4.31, or 4.6 percent, to $89.47.
Tesla sank 8.2 percent on news that the National Transportation Safety Board has sent two investigators to look into a fatal crash and fire Friday in California that involved a Tesla electric SUV. The agency said on Twitter that it's not clear whether the Tesla Model X was operating on its semi-autonomous control system called Autopilot at the time. The stock lost $25 to $279.18.
Social media companies also weighed on market. Twitter slumped 12 percent after Citron Research said it is shorting the company, citing Twitter's reliance on licensing its users' data. The remarks come ahead of a Senate hearing on data privacy set for next month. The stock gave up $3.84 to $28.07.
Facebook, whose shares have been hard hit recently amid heightened government scrutiny into the social media giant's collection of private user data, also declined, sliding another $7.84, or 4.9 percent, to $152.22. Facebook has lost 20 percent of its value since hitting a record high Feb. 1.
Investors have been whipsawed over the past few trading sessions as equities tumbled last week, only to rebound sharply Monday and then resume their selloff Tuesday.
The 2008 financial crisis reshaped markets and the economy in ways no one foresaw; yet in many respects, Wall Street is little changed and new risks are on the horizon https://t.co/kxfs4RHPPr— WSJ Markets (@WSJmarkets) March 27, 2018
Traders are trying to suss out whether the United States will reach negotiated truces to ward off an all-out trade war after fears grew that there could be a surge in protectionism in the midst of rising borrowing costs and concerns that inflation could be poised to accelerate.
"The bottom line is the trade issue and uncertainty related to that is not going to fade in one day because all of a sudden we started thinking that we would reach some sort of a settlement with China," Krishna Memani, chief investment officer at OppenheimerFunds, said by phone. "This is going to be somewhat of a long process for things to settle down."
Bond prices rose, sending the yield on the 10-year Treasury down to 2.78 percent from 2.85 percent late Monday.
10-year Treasury yield hits six-week low https://t.co/pVKcF01sf4— fastFT (@fastFT) March 27, 2018
The decline in bond yields helped pull banks and other financial stocks lower. When bond yields decline it can bring down interest rates on mortgages and other loans, making them less profitable for banks. Citizens Financial Group lost $1.53, or 3.5 percent, to $41.59.
Lower bond yields helped boost demand for high-yield stocks, such as real estate investment trusts and utilities. PG&E gained $1.07, or 2.5 percent, to $43.94.
Traders welcomed the latest corporate deal news.
If the Dow closes in negative territory for the quarter, that will snap a nine-quarter streak of gains, the longest such streak for the Dow ever https://t.co/ioKBhs9oB0— MarketWatch (@MarketWatch) March 27, 2018
U.S.-listed shares of British drugmaker GlaxoSmithKline rose 2.6 percent after the company agreed to buy out its Swiss partner Novartis in their consumer health joint venture for $13 billion in cash. GlaxoSmithKline gained 96 cents to $38.39.
Benchmark U.S. crude declined 30 cents to settle at $65.25 a barrel on the New York Mercantile Exchange. Brent crude, used to price international oils, slipped a penny to close at $70.11.
In other energy futures trading, heating oil dropped 1 cent to $2.02 a gallon. Wholesale gasoline was little changed at $2.01 a gallon. Natural gas rose 7 cents, or 2.8 percent, to $2.69 per 1,000 cubic feet.
Gold fell $13, or 1 percent, to $1,342 an ounce. Silver dropped 14 cents to $16.54 an ounce. Copper gained 3 cents to $3 a pound.
The dollar rose to 105.54 yen from 105.22 yen on Monday. The euro fell to $1.2402 from $1.2455.
After-hours buzz: LULU, RH, SONC, NKE & more https://t.co/zrlH2N32na— CNBC (@CNBC) March 27, 2018
Major indexes in Europe finished higher. Germany's DAX rose 1.6 percent, while France's CAC 40 gained 1 percent. The FTSE 100 index of leading British shares added 1.6 percent.
In Asia, Japan's benchmark Nikkei 225 gained 2.7 percent. Australia's S&P/ASX 200 added 0.7 percent. South Korea's Kospi rose 0.6 percent. Hong Kong's Hang Seng added 0.8 percent.