Walgreens nixes Rite Aid merger; Blue Apron makes trading debut
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U.S. stocks tumbled on Thursday, with the Dow on track for its biggest one-day drop in more than a month as the technology sector resumed its selloff, overshadowing a gain in the financial sector.
The Dow Jones Industrial Average fell 164 points, or 0.8%, to 21,290, its biggest percentage decline since May 17. The S&P 500 index dropped 22 points, or 0.9%, to 2,418. The Nasdaq Composite Index tumbled 111 points, or 1.8% to 6,122.
The Nasdaq is on track for its third straight session with a move of 1%, including a slump of 1.6% on Tuesday and Wednesday's 1.4% rally--its biggest one-day rise since Nov. 7.
The outsize moves in all three sessions came on volatility in the technology sector (XLK), which fell 2.1%. Among the biggest decliners in the sector were Microsoft Corp. (MSFT) which declined 2.2% while Google-parent Alphabet Inc. (GOOGL) was trading 2.8% lower. Apple(AAPL) lost 2%.
The losses in tech were so severe on Thursday that every component in the sector was in negative territory.
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Tech shares have struggled in recent weeks, with the sector down 2.5% thus far this month amid concerns the group's rally may be running out of steam at a time when valuations are stretched by many metrics.
"If you were to pick one particular point influencing trading right now, it would be that people think the large-cap tech stocks are overvalued right now," said Wayne Kaufman, chief market analyst at Phoenix Financial Services. "I'm bullish on tech, especially semiconductor stocks, but there are concerns that it is an overcrowded trade, and that they'd be vulnerable if the economy slowed."
On the upside, financial shares (XLF) jumped 0.9% after the 34 biggest U.S. banks passed the Federal Reserve's stress test (http://blogs.marketwatch.com/thetell/2017/06/28/fed-stress-test-and-bank-capital-return-plans-live-blog/) and received a green light for plans to return capital to shareholders. The Fed determined the country's biggest banks have "strong" levels of capital and would be able to keep lending even during a severe recession.
Goldman Sachs (GS) rose 1.9% while J.P. Morgan Chase & Co. (JPM) added 1.5%. Citigroup Inc. (C) advanced 3.2%.
"We've had some major players in the financial sector be overly impacted in a negative way for a long time. They've been beaten down, but news like this could help them become one of the leading sectors in the second half of the year," said Kevin Miller, chief executive officer of E-Valuator Funds, which have about $150 million in assets.
Meanwhile, Treasury Secretary Steven Mnuchin told reporters that the financial markets shouldn't be worried about the debt ceiling. The U.S. government's borrowing limit will have to be raised soon to stave off default. Mnuchin also announced a series of new sanction against North Korea in a bid to discourage and punish the country for its nuclear weapons program, according to media reports.
Bonds shadow central banks: Financial shares have also been tracking a rise in long-term Treasury yields . A selloff in U.S. and European bonds on Thursday sent yields higher as investors maneuvered around potential moves by the Federal Reserve, the European Central Bank and the Bank of England. Bond prices and yields move inversely.
"Comments from central bankers in recent days suggest that perhaps it will not be too long before the Fed is joined by other central banks in tightening monetary policy," said Richard Perry, market analyst at Hantec Markets.
"In recent days, there have been hawkish indications from the ECB's Draghi, the Bank of England's Carney and Bank of Canada's Poloz, all of which have signaled a potential end to their easing programs could be close," he noted.
Buck under pressure: The ICE Dollar Index , which measures the U.S. dollar against a basket of six currencies, was down 0.4% to 95.63.
"Playing currencies is a game of relatives, and with traders questioning the Fed's ability to tighten in light of subdued inflation, the dollar is under pressure," said Perry.
Both the euro and the pound have marched higher against the greenback, he noted.
The weaker dollar was seen as giving a boost to some dollar-denominated commodities, such as oil and copper, on Thursday. Those moves could aid resource-related stocks on Wall Street.
Later in the session,
Economic docket: In the latest economic data, the latest revision to first-quarter GDP (http://www.marketwatch.com/story/poor-start-to-2017-not-really-first-quarter-gdp-raised-again-to-14-2017-06-29)was raised to 1.4%, up from the previous estimate of 1.2% and double the initial 0.7% read.
Separately, jobless claims rose by 2,000 in the latest week (http://www.marketwatch.com/story/jobless-claims-edge-up-by-2000-to-24400-2017-06-29), although they remain at levels that are extremely low from a historical standpoint.
See: MarketWatch's economic calendar (http://www.marketwatch.com/economy-politics/calendars/economic).
A busy week of Fed speakers rounds off with James Bullard in London. The St. Louis Fed president said the current level of interest rates is appropriate for the low-growth, tepid inflation environment and the Fed does not need to act in response to future developments. Bullard isn't on the Fed's current rate-setting board.
Stocks in focus:Rite Aid Corp. (RAD) tumbled 29% after Walgreens Boots Alliance Inc. (WBA)canceled its merger agreement with Rite Aid (http://www.marketwatch.com/story/walgreens-terminates-rite-aid-merger-replaces-with-agreement-to-buy-2186-stores-2017-06-29). Instead, Walgreens is buying 2,186 Rite Aid stores and related assets, sending Walgreens shares up 1%. In a related move, shares of Fred's Inc. (FRED) plunged 21% after a deal to buy some Rite Aid stores was terminated
Blue Apron Holdings Inc. rose 1.8% in its trading debut after its initial public offering priced at $10 a share late Wednesday, on the low end of its estimate, valuing the meal-kit delivery company at $1.9 billion.
Read:Why Blue Apron's valuation just got slashed (http://www.marketwatch.com/story/why-blue-aprons-valuation-just-got-slashed-2017-06-28)
Pier 1 Imports Inc. (PIR) tumbled 9.5% after it reported first-quarter revenue that missed expectations (http://www.marketwatch.com/story/pier-1-imports-stock-sinks-as-revenue-misses-target-2017-06-28).
Other markets: Gold was modestly lower while oil prices firmed, with the dollar rally and a sizable weekly decline in U.S. crude production seen as factors.
Stock markets in Asia (http://www.marketwatch.com/story/financial-stocks-lead-asian-market-gains-2017-06-28) rose, but European benchmarks were feeling the weight (http://www.marketwatch.com/story/european-stocks-step-lower-as-euro-rally-outweighs-gains-for-banks-miners-2017-06-29) of a rising euro.
--Carla Mozee contributed to this report.
(END) Dow Jones Newswires
June 29, 2017 15:15 ET (19:15 GMT)