Stocks Turn Lower as High-Flying Tech Shares Fall

By Corrie Driebusch and Riva Gold Features Dow Jones Newswires

Technology shares tumbled Friday, as investors pulled back on one of the most profitable trades of the year so far.

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Large tech companies pushed major indexes higher in recent months, with stalwarts such as Facebook, Apple and Amazon.com leading the rise. Those companies' outsized gains had prompted some jitters among investors in recent trading sessions, and a series of downbeat research notes about the group and climbing valuations sparked the Friday selloff, some traders and analysts said.

The Nasdaq Composite fell 2.5% Friday. Technology companies in the S&P 500 dropped 3.6%, dragging the broader index into the red. It's a reversal of fortune for a group that has had a strong start to 2017. The tech-heavy Nasdaq Composite's 15% year-to-date gains are roughly double the Dow Jones Industrial Average's rise, and the tech sector in the S&P 500 is up 17%.

Facebook, Google parent Alphabet, Amazon, Apple and Microsoft shares all fell more than 3% on Friday, though they remain up by double digits for the year. Traders and analysts attributed the selloff in part to a research note by Goldman Sachs that called out the five companies' recent outperformance as potentially overheated.

The Dow Jones Industrial Average spent much of the session higher on the day before slipping into negative territory in the afternoon. In recent trading the blue-chip index fell 21 points, or 0.1%, to 21161. The S&P 500 declined 0.6%.

Financial markets had been relatively calm through a series of events this week, including a European Central Bank meeting, the surprise result in the U.K. election and former FBI director James Comey's testimony.

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Neither the Dow industrials nor the S&P 500 had posted a daily move of more than 0.3% all week.

In the U.K. on Friday, stocks tied to the economy fell and the pound dropped to as low as $1.2636 before recovering to $1.2726 after British voters deprived Prime Minister Theresa May and her ruling Conservative Party of a majority in Parliament.

Investors fear a hung parliament would usher in a fresh period of political uncertainty and make it more difficult for the U.K. to secure a favorable deal in its negotiations to exit from the European Union.

While this sort of event used to generate a more volatile trading environment globally, "the world seems pretty calm about it," said Adam Karrlsson-Willis, vice president of equity trading at INTL FCStone Financial.

"We have two years of question marks now," he said. "Everyone is sitting on their hands again to wait and see...nobody wants to make a distinct move either way."

London's FTSE 100 index, which generates roughly 70% of its revenue overseas, rose 1% Friday as companies benefited from a weaker currency.

But companies more dependent on business inside the U.K., including Lloyds Banking Group, Royal Bank of Scotland Group, Taylor Wimpey and Barratt Developments all moved lower as investors prepared for a period of uncertainty on the government's budget priorities, a more challenging path for Brexit and a possible hit to the economy.

U.K. banks fell as 10-year U.K. gilt yields edged down to 1.001% from 1.034%, according to Tradeweb, reflecting a judgment that U.K. rates might remain lower for longer.

Still, longer term, some investors see the election outcome as potentially supportive of U.K. assets because of the chance of greater fiscal stimulus under the new government and a "softer" Brexit.

"Uncertainty about the U.K. government is probably bad for the [U.K.] currency in the short term but could be quite good for the economy," said Ben Kumar, investment manager at Seven Investment Management.

Earlier, Japan's Nikkei rose 0.5% as the dollar climbed against the yen, supporting exporters in the index. Shares of SoftBank jumped to 17-year highs following a surge in Alibaba shares in the U.S., in which it has a large stake.

Korea's Kospi ended at a record high, helped by a rise in shares of Samsung Electronics, which has the biggest weighting in the index.

Write to Corrie Driebusch at corrie.driebusch@wsj.com and Riva Gold at riva.gold@wsj.com

(END) Dow Jones Newswires

June 09, 2017 15:22 ET (19:22 GMT)