Tech woes, trade tensions sink stocks; Dow closes down more than 450
Trouble for technology companies set off a rout Monday as markets were also rattled by growing fears about a trade war with China.
It was a broad sell-off: The Dow Jones industrial average plunged more than 758 points at its low in afternoon trading before clawing back some of its losses. It finished the day down 459 points, or 1.9 percent. The Standard & Poor's 500-stock index was down 2.23 percent and the tech-heavy Nasdaq Composite was down 2.74 percent as volatility continues to rock markets.
All three indexes are negative for the year. The Dow and S&P 500 are in correction territory. A correction is generally considered a 10 percent drop from its peak. The price of gold and of silver, both considered flights to safety, were up on Monday.
Ten of the 11 stock sectors closed in correction territory Monday. Consumer staples was leading the downhill march, followed by information technology, financial services, healthcare and industrials.
China's government said on Sunday that it would immediately impose tariffs on 128 U.S. commodities it imports in retaliation for President Donald Trump's levies on steel and aluminum. The tax on U.S. goods could include pork, soybeans and fruit as well as aircraft.
The fears of an impending trade war have rocked markets since Trump announced 25 percent tariffs on steel and 10 percent on aluminum that the United States imports.
"It's three things, technology stocks, trade concerns and economic growth numbers slowing down," said James Norman, head of equity strategy at QS Investors. "Technology has been one of the best performing areas of the market and drove much of the returns in 2017 and the first month of 2018. With stretched valuations, investors are becoming concerned that they are overpaying for potential growth."
Two manufacturing indexes reporting Monday showed that economic growth may be slowing. The Institute for Supply Management's manufacturing index and the Purchasing Managers Index for manufacturing both missed expectations, adding to market shivers.
In a Monday note to clients, Jason Pride, chief investment officer for private clients at Glenmede Wealth Management, cited festering trade war fears as a driver in the market's volatility.
"The Trump administration's announcements on trade sanctions in total so far encompass a relatively small portion of overall U.S. trade," according to Pride's note. "However, this could only be the beginning, as the Trump administration ponders the extension of further sanctions on the Chinese trade relationship."
. @lizpeek on tariffs: 'Not only have [the Chinese] had higher tariffs but, of course, they also engaged in cheating on the tariffs that exist and all kinds of other means to keep American goods out of their markets.' pic.twitter.com/E2NsSoADks— FOX Business (@FoxBusiness) April 2, 2018
The Dow's big laggards included Intel, Cisco, 3M, Nike and Microsoft, as well as retail giants Home Depot and Walmart.
Shares of athletic wear giant Nike were down nearly 3.5 percent following a weekend story in the Wall Street Journal that, citing current and former employees, described workplace culture problems that have persisted for years. One executive who was widely expected to be the next chief executive had resigned and would leave the company in August, according to a March memo from the current CEO.
Troubles for technology companies are a big factor driving stocks lower. Markets were hampered Monday by President Trump's Twitter assault on Amazon.com, in which he knocked the retailers relationship with the U.S. Postal Service. The retail giant's stock was down 5.2 percent.
"I guess as long as there is uncertainty around global trade, markets will be on edge," said Charlie Ripley, investment strategist with Allianz Investment Management. "A lot of this today is being driven by technology. Trump had some unfavorable comments on Amazon and the Post Office, and that is helping drive down the tech sector."
Shares of computer-chip giant Intel were on pace for one of their worst days in years on a Bloomberg News report that Apple may take its chip manufacturing in-house.
Shares of Silicon Valley darling Tesla were off 5.1 percent following questions about its self-driving technology system known as Autopilot. The company said Friday, after the markets closed, that a recent fatal crash of one of its cars involved an activated Autopilot. In an unusual move, the National Transportation Safety Board investigating the crash publicly said on Sunday that it was "unhappy" with Tesla's public discussion of the accident.
Also on Sunday, Tesla's founder and CEO took to Twitter to play an April Fool's Day prank, joking that "Telsa has gone completely and totally bankrupt." Tesla's share value has slumped 18 percent in the past five trading days.
The Nasdaq is close to losing all its gains for 2018. That is a surprising reversal for the technology industry, which had spearheaded much of the gains of the nearly 10-year bull market. Over the past five years, Amazon's share value has increased 424 percent, Apple has grown 172 percent, Facebook 509 percent and Tesla 475 percent.
Facebook came under heavy fire from lawmakers last month in the United States and Britain after news reports raised questions about whether it allowed third-party developers to access the data of users without their permission — a potential violation of its privacy agreement with the U.S. government.
Facebook also finds itself in a tiff with rival giant Apple. Facebook chief executive Mark Zuckerberg during the weekend responded to Apple chief executive Tim Cook's criticism of the social-media company's data crisis. The scandal involved a third-party company, Cambridge Analytica, which harvested personal data on 50 million Facebook users.
Cook criticized Zuckerberg during an interview last week when he was asked what he would do if he were the Facebook chief.
"I wouldn't be in this situation," Cook said, adding "We care about the user experience, and we're not going to traffic in your personal life."
An ugly sell-off Monday signals more pain ahead for the market as stocks broke key technical levels. https://t.co/2H7Jwy2UGA— CNBC (@CNBC) April 2, 2018
Zuckerberg responded in an interview with Vox, appearing to criticize Apple's business model as based on "serving rich people."
"If you want to build a service that helps connect everyone in the world, then there are a lot of people who can't afford to pay," Zuckerberg said, referring to Facebook. "And therefore, as with a lot of media, having an advertising-supported model is the only rational model that can support building this service to reach people. ... But if you want to build a service which is not just serving rich people, then you need to have something that people can afford."