U.S. Stocks Drop as Tech Shares Resume Slide

By Riva Gold Features Dow Jones Newswires

U.S. stock indexes fell Thursday as shares of technology companies resumed a recent bout of weakness.

Continue Reading Below

The Dow Jones Industrial Average fell 99 points, or 0.5%, to 21378 shortly after the opening bell. The S&P 500 fell 0.6% and the Nasdaq Composite lost 0.9%.

Technology stocks, the best-performing sector in the S&P 500 this year, have seesawed in recent sessions as investors have debated whether the group's rally has been overdone. The group fell 1% in the S&P 500 on Thursday but remained up 15% for the year -- outpacing the broader index's 8% gain for 2017.

Some investors and analysts warn the prospect of a stronger economy and higher rates could push investors out of tech and into areas such as banks that are cheaper and benefit more from a rising rate environment. In recent weeks, bond yields have climbed on growing expectations that global central banks could dial back their monetary stimulus.

Government bonds ticked lower, with the yield on the 10-year U.S. Treasury note rising to 2.369% on Thursday, according to Tradeweb, from 2.334% Wednesday. Yields rise as bond prices fall.

"People were hiding out in tech stocks, which were perceived as safer havens when the U.S. economy was going through a soft patch," said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management. At a wider level, however, while a hiccup in the bond market could ripple over into stocks in the short-term, if the economy continues to strengthen, there is a good chance equities will move higher too, he said.

Continue Reading Below

Elsewhere, the Stoxx Europe 600 fell 1% in afternoon trading as minutes from the European Central Bank's June meeting showed policy makers considered dropping a pledge to accelerate their massive bond-buying program.

Banks and insurance companies in Europe outperformed as they tend to benefit from higher government bond yields.

"There is a near-unanimous view coming out of central banks for an unwinding of this unconventional policy, either through interest rate rises or pulling back on quantitative easing, or in the United States, selling down some of the central bank holdings," said Paul Flood, multiasset portfolio manager at Newton Investment Management. "People have finally woken up to the fact there's not a backstop, a forced buyer in the marketplace anymore," he said.

Earlier, most Asian stock indexes traded in narrow ranges and stuck close to Wednesday's closing levels.

Japan's Nikkei Stock Average fell 0.4% after the yen strengthened against the dollar, pressuring the export-heavy index. Hong Kong's Hang Seng Index eased 0.2% even as index heavyweight Tencent inched higher, while the Shanghai Composite Index added 0.2%.

--Akane Otani contributed to this article.

Write to Riva Gold at riva.gold@wsj.com

(END) Dow Jones Newswires

July 06, 2017 10:07 ET (14:07 GMT)