U.S. Stocks Slide on Technology Weakness

By Akane Otani and Jon Sindreu Features Dow Jones Newswires

U.S. stock indexes slid Thursday as technology shares resumed a recent spurt of weakness.

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Stock losses accelerated in afternoon trade, chipping away more than 200 points from the Dow Jones Industrial Average. The moves marked the latest pullback for the technology sector, which rallied in the first half of the year as investors bet on fast-growing companies but has pared gains more recently.

Strong earnings have helped stocks climb to fresh highs in the first half of the year, but many investors say they are growing more cautious. Recent economic data, especially for inflation, has been middling; stock valuations are trading at higher-than-average levels; and hopes for policy changes like tax cuts and fiscal stimulus to supercharge earnings have dwindled since Election Day.

In recent weeks, central banks around the world have also increasingly suggested that they will push for a normalization in monetary policy -- pushing yields on government bonds higher.

"At some point, we're going to see a flushing out of the weak hands," said Tom Stringfellow, president of Frost Investment Advisors, who added that he expects more volatility in the second half of the year.

The Dow Jones Industrial Average fell 233 points, or 1.1%, to 21216, erasing its gains for the week. The S&P 500 lost 1.3%, and the Nasdaq Composite fell 2.2%, dragged lower by sliding technology stocks.

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Technology shares fell 2.5% in the S&P 500, with Google parent Alphabet, Microsoft and chip maker NVIDIA each losing more than 2%.

Financial shares edged higher, benefiting from a recent rise in Treasury yields, as well as the Federal Reserve's decision Wednesday to allow all major U.S. financial institutions to ramp up dividend payouts and share buybacks.

The KBW Nasdaq Bank Index of U.S. commercial lenders added 0.7%, while the yield on the 10-year U.S. Treasury note rose to 2.268%, according to Tradeweb, from 2.223% Wednesday. Higher rates boost banks' net-interest margins, a key measure of lending profitability.

Elsewhere, expectations of higher interest rates in Europe and the U.K. bolstered the euro and the pound, which were both up roughly 0.5% against the U.S. dollar.

The Stoxx Europe 600 was down 1.3%, with broad losses across sectors offsetting gains in bank shares.

A raft of statements Wednesday by policy makers at the European Central Bank, the Bank of England and the Bank of Canada has convinced many investors that the progressive end of monetary stimulus is coming nearer.

The key test is whether economic data and corporate profits come in strong enough to justify borrowing costs going up, analysts said. While optimism from central bankers can give stocks a boost, higher rates can also make them look less attractive.

"What's surprising is that equities continue to take it so well," said Philippe Gijsels, chief strategy officer at BNP Paribas Fortis. "Markets have benefited enormously from the very loose monetary policy. It would be logical to assume that if this stops you'll have an impact on markets."

Earlier, Japan's Nikkei Stock Average edged up 0.4%, while Hong Kong's Hang Seng and Australia's S&P/ASX 200 added 1.1% each.

Write to Akane Otani at akane.otani@wsj.com and Jon Sindreu at jon.sindreu@wsj.com

(END) Dow Jones Newswires

June 29, 2017 13:56 ET (17:56 GMT)