Gravity overtakes Apple shares following another downgrade
Major U.S. stock-market benchmarks closed lower on Monday, weighed by a second straight session of firm losses in technology shares, but the shift away from tech appears to be feeding recently unloved sectors and smaller-cap stocks.
The tech-heavy Nasdaq Composite Index , which hit an all-time high only to close down 1.8% on Friday, remained under pressure. Overcoming a 97-point deficit on the session, the index closed down 32.45 points, or 0.5%, at 6,175.46.
While, at first, losses in broader indexes were largely contained, the slump started spreading. The S&P 500 index finished down 2.38 points, or 0.1%, at 2,429.39, overcoming a nearly 12-point deficit earlier. Six of the benchmark's 11 sectors closed lower. The technology sector led losses, down 0.8%, while energy shares were up 0.7% and telecom stocks rose 0.9%.
The Dow Jones Industrial Average snapped three days of gains to close down 36.30 points, or 0.2%, at 21,235.67, as losses in shares of Apple Inc.(AAPL) and McDonald's Corp.(MCD) offset gains from shares of General Electric Co. (GE) and Chevron Corp.(CVX)
Friday's tech selloff wasn't surprising given how sharply these shares rallied over the past 12 months, said Karyn Cavanaugh, senior market strategist at Voya Financial.
"It could be a little concerning, because just as the tech has been leading the market on the upside, they can lead the market down as well," Cavanaugh said. "However, tech earnings have been particularly strong and given improving fundamentals, any swoon should be a buying opportunity for investors," she added.
While there's a lot of focus on the tech selloff, Bill Stone, chief investment strategist at PNC Asset Management Group, sees what's going on in the market as more of a rotation.
"Last week we had a big selloff in tech and a bigger rally in financials and energy," Stone said. "Some of these momentum stocks have given up for now, but everything needs a breather." While tech shares on the S&P 500 are down 1.7% for the month of June so far, financials are up 4.6% over the same period and energy shares are up 2.2%.
And that rotation isn't just limited to large caps, recently battered small-to-mid caps are starting to get some love too, Stone said. While the S&P 500 is up 0.4% for June, the Russell 2000 and the S&P Small Cap 600 are both up 3.6%.
On Friday, the Nasdaq Composite lost 1.8%, with its sharp pullback (http://www.marketwatch.com/story/nasdaq-is-threatening-to-log-its-biggest-blown-lead-in-212-months-as-tech-unravels-2017-06-09) coming after big recent gains for heavyweight tech stocks. The selloff (http://www.marketwatch.com/story/us-stocks-tipped-for-more-gains-as-investors-weigh-up-uk-election-results-2017-06-09) also followed a warning from Goldman Sachs analysts that high-fliers such as Facebook Inc.(FB), Amazon.com Inc.(AMZN), Apple, Microsoft Corp.(MSFT) and Google parent Alphabet Inc.(GOOGL) (GOOGL) may be overextended (http://www.marketwatch.com/story/what-sparked-the-nasdaqs-worst-two-session-rout-in-9-months-2017-06-12). Meanwhile, shares of Netflix Inc.(NFLX) slipped into correction territory (http://www.marketwatch.com/story/netflix-shares-fall-into-correction-territory-before-bouncing-back-2017-06-12). But not all tech stocks (http://www.marketwatch.com/story/the-surprise-tech-stocks-that-are-bucking-the-selloff-2017-06-12) were getting caught up in the selloff.
Read:'The crowd is always wrong'? If you believe Jack Bogle, here's where to invest (http://www.marketwatch.com/story/the-crowd-is-always-wrong-if-you-believe-jack-bogle-heres-where-you-should-invest-2017-06-12)
And see:Sell for the summer as the market's next 5% move is down, Deutsche Bank says (http://www.marketwatch.com/story/sell-for-the-summer-as-the-stock-markets-next-5-move-is-down-deutsche-bank-says-2017-06-12)
Howard Gold:It's all over for the FAANG stocks (http://www.marketwatch.com/story/its-all-over-for-the-faang-stocks-2017-06-12)
Economic news: The Treasury Department reported a budget deficit of $88 billion (http://www.marketwatch.com/story/us-runs-budget-deficit-of-88-billion-in-may-treasury-says-2017-06-12) for May, up from $53 billion a year ago.
As the week kicks off, investors are also focused on the Federal Reserve (http://www.marketwatch.com/story/all-eyes-on-tech-sector-ahead-of-expected-fed-interest-rate-hike-2017-06-10), which on Wednesday is widely anticipated to deliver an interest-rate hike.
Individual movers: Shares in Apple finished down 2.5% following a downgrade to neutral from buy by Mizuho Securities analysts (http://www.marketwatch.com/story/apple-downgraded-by-mizuho-the-second-ratings-cut-in-a-week-2017-06-12). Still, Apple shares are up 25% year to date, compared with 8.5% for the S&P 500.
It is the second time in a week that the iPhone maker has been downgraded, with the more bearish view once again stemming from concerns that optimism over the iPhone 8 has been baked into the stock.
On the upside, General Electric Co.'s shares (GE) finished up 3.6% following news that CEO Jeff Immelt is retiring (http://www.marketwatch.com/story/ges-jeff-immelt-to-step-down-as-ceo-and-chairman-2017-06-12-6914026) after nearly 16 years at the helm of the company and will be replaced by John Flannery, currently president and CEO of GE Healthcare.
Apparel stocks were some of the best performers Monday, with shares of Under Armour Inc.(UAA) (UAA) leading the S&P 500 with a 5% gain. Hanesbrands Inc.(HBI) shares rose 3.4%, while shares of Nike Inc.(NKE) advanced 1.1%.
Other markets:European equities (http://www.marketwatch.com/story/european-stocks-pushed-down-by-tech-selloff-british-governments-woes-2017-06-12) pulled back, and Asian markets closed with losses (http://www.marketwatch.com/story/asian-markets-slip-as-tech-stock-selloff-spreads-2017-06-11), as the tech selloff spread to exchanges there. Oil futures (http://www.marketwatch.com/story/crude-rises-as-market-attempts-to-buck-recent-pressure-2017-06-12) rose 0.6% to settle at $46.08 a barrel, while gold futures (http://www.marketwatch.com/story/gold-pinned-near-unchanged-with-weak-tech-stocks-and-a-probable-fed-hike-in-play-2017-06-12) declined 0.2% to settle at $1,268.90 an ounce, and a key dollar index traded flat. Treasury yields inched higher, with the 10-year yield up a basis point at 2.21%.
--Victor Reklaitis in London contributed to this article.
(END) Dow Jones Newswires
June 12, 2017 16:38 ET (20:38 GMT)