US stocks tumble as tech shares drop for second day

U.S. stocks edged lower on Monday amid renewed pressure on technology stocks.

The Nasdaq composite and the Nasdaq 100 indexes fell 0.7 percent and 0.9 percent respectively, with shares of Apple falling after Mizuho Securities downgraded the stock to neutral from buy. Analyst Abhey Lamba said the best-case scenario is priced into the shares.

Other big tech stocks followed Apple lower, with Amazon, Alphabet, Netflix and Facebook all declining.

Also, the Technology Select Sector SPDR ETF (XLK) broke below its 50-day moving average for the first time since April 18.

Tech knocked the S&P and Nasdaq off of record highs Friday, as the best-performing sector of 2017 posted its worst session since May 17.

“The bulls are pointing out that Friday was merely a ‘factor’ rotation. Out of favor sectors or recent underperformers (like Financials) benefitted at the expense tech,” said Peter Tchir, managing director at Brean Capital, in a note sent Monday.

“This was a ‘student body left’ to ‘student body right’ sort of swing in sentiment. It seemed unnatural with little catalyst – other than price,” Tchir said.

The S&P 500 slipped 0.28 percent, with information technology dropping 1.1 percent to lead decliners. The Dow Jones industrial average fell 60 points, with Apple contributing the most losses.

“If you go back to the election, financials took off and then this year tech took the leadership,” said Tom Wright, director of equities at JMP Securities. “It’ll be interesting to watch whether this is just a blip or if we see continued weakness in these names.”

Investors also looked ahead to a key Federal Reserve meeting, where the U.S. central bank is widely expected to raise interest rates. Market expectations for a rate hike were at 95.8 percent Monday, according to the CME Group’s FedWatch tool.

Fed officials should also give a nod to the fact that inflation is weaker but that they remain confident about the economy. Fed Chair Janet Yellen is also expected to talk more about how the Fed could move ahead to pare back its massive $4.5 trillion balance sheet later this year.

“I doubt that Janet Yellen will tip her hand any more than she can or needs to allow the stiff tailwind that she and her colleagues supply to persist,” said Jeremy Klein, chief market strategist at FBN Securities.

Treasurys ticked lower on Monday, with the benchmark 10-year note yield climbing to 2.218 percent and the two-year yield hitting a one-month high of 1.355 percent, according to Reuters.

In corporate news, General Electric CEO Jeff Immelt will be stepping down and John Flannery, current president and CEO of GE Healthcare, will take over as chief executive in August. The announcement sent GE shares more than 3 percent higher.

Source: CNBC