Tesla stock falls into bear market territory, tops Nasdaq losers
U.S. stocks were trading lower Thursday as investors continued to rotate out of battered technology names.
A combination of geopolitical jitters and growing signs that global central banks are inching closer to unwinding policies that have helped to support prices in both stocks and government bonds is also weighing on the broader market. A round of economic data, including readings on private-sector payrolls and weekly layoffs, did little to soothe worries about the expected muted pace of the Federal Reserve's policy plans.
The S&P 500 was off by 19 points, or 0.8%, to 2,413, with all 11 sectors trading in negative territory. Telecoms and energy shares were leading the declines.
The Nasdaq Composite Index fell 50 points, or 0.8%, to 6,100, erasing most of its gains from the previous session.
The general shift from tech to other stocks that began in early June is still in play, according to Mike Antonelli, equity sales trader at Robert W. Baird & Co.
"The rotation out of tech is dominating stocks and is the overarching theme in the market," he said. "People should not mistake rotation for volatility and I am not terribly freaked out as investors are not selling everything equally."
Kent Engelke, chief economic strategist at Capitol Securities Management Inc., said the market's moves are likely magnified by the selling pressure in technology stocks given how widely they are held.
"Technology has four times greater impact on the averages than oil because of technology's massive percentage of the capitalization of the S&P," he said. "The amount of monies required to keep the megasized technology growth issues at current levels is gargantuan."
The Dow Jones Industrial Average dropped 130 points, or 0.6%, to 21,348. General Electric Co. (GE) and Merck & Co.(MRK) were down sharply.
Read:B. of A. warns the rise of ETFs is distorting the stock market (http://www.marketwatch.com/story/bofa-warns-the-rise-of-etfs-is-distorting-the-stock-market-2017-07-05)
"There are a lot of things keeping risk appetite in check," said Chris Beauchamp, senior market analyst at IG in London. "Geopolitical worries are beginning to bear down" on Wall Street and in Europe , where losses in regional benchmarks on Thursday accelerated, he said.
Investors are also increasingly becoming skittish due to escalating tensions surrounding North Korea's test launch this week of an intercontinental ballistic missile, sparking a "broader move out of equities back to bonds" as they sought assets considered havens, Beauchamp said.
President Donald Trump said Thursday in Warsaw that he's considering "some pretty severe things" in response to North Korea's (http://www.marketwatch.com/story/trump-considering-pretty-severe-things-over-north-korea-threat-2017-07-06) ongoing efforts to develop nuclear weapons that can reach the U.S.
Read:U.S., Russia clash at U.N. over approach to North Korea threat (http://www.marketwatch.com/story/us-russia-clash-at-un-over-approach-to-north-korea-threat-2017-07-06)
"The market is not getting too panicky just yet, but you're into that July, August, September period where we could see a bit of a grind," he added.
Some analysts speculated that rising bond yields are hurting investor sentiment.
"People are nervous about bond yields going up and you can see that in exaggerated moves in technology stocks and financials," said Ian Winer, head of the equities division at Wedbush Securities.
Economic docket:Private-sector employers (http://www.marketwatch.com/story/private-sector-job-growth-throttles-back-in-june-adp-says-2017-07-06) added a seasonally-adjusted 153,000 jobs during the month, below the 180,000 jobs that a consensus of economists had forecast. Meanwhile, initial jobless claims (http://www.marketwatch.com/story/us-jobless-claims-climb-4000-to-248000-2017-07-06) in the period between June 25 and July 1 increased 4,000 to a seasonally adjusted 248,000.
Economists use these numbers to get a feel for the official nonfarm payrolls due on Friday, with the consensus estimate at 179,000 new jobs created in June. The Federal Reserve closely watches labor-market conditions as part of its monetary-policy assessment, and the report comes as investors continue to unpack the Fed minutes released Wednesday.
Those minutes left many uncertain as to policy makers' strategy for reducing the Fed's $4.5 billion in debt holdings (http://www.marketwatch.com/story/fed-might-start-balance-sheet-drawdown-in-september-fomc-minutes-hint-2017-07-05), which has acted as support for the U.S. economy.
Separately, the trade deficit (http://www.marketwatch.com/story/trade-deficit-drops-23-in-may-but-the-trend-is-no-friend-2017-07-06) fell 2.3% to $46.5 billion in May from $47.6 billion in April, largely because of fewer imports of cellphones and other consumer goods, but the longer-run outlook for the U.S. was still grim.
The Institute for Supply Management's nonmanufacturing index (http://www.marketwatch.com/story/service-sector-accelerates-in-june-ism-survey-finds-2017-07-06)rose to 57.4% in June from 56.9% in May, topping the MarketWatch-compiled economist consensus for a reading of 56.5%.
As for Fed speakers, Vice Chairman Stanley Fischer will speak about government policy and labor productivity at 7:30 p.m. Eastern at Martha's Vineyard Hebrew Center Summer Institute in Vineyard Haven, Mass.
See: MarketWatch's economic calendar (http://www.marketwatch.com/economy-politics/calendars/economic).
Stocks in focus: GE shares fell 4.2% after the European Union's antitrust watchdog (http://www.marketwatch.com/story/ge-canon-merck-kgaa-accused-of-antitrust-moves-2017-07-06) said GE may have misled regulators when the EU was reviewing its $1.65 billion deal with LM Wind Power.
Tesla Inc.(TSLA) shares slid into bear market territory, falling 6%, after the electric-car maker's Model S failed to receive a top safety award (http://www.marketwatch.com/story/teslas-stock-drops-after-model-s-fails-to-qualify-for-top-safety-award-2017-07-06) from the Insurance Institute for Highway Safety. Its shares had tumbled on Wednesday (http://www.marketwatch.com/story/teslas-stock-tumbles-into-correction-territory-but-analysts-sees-new-highs-ahead-2017-07-05) following a disappointing sales-delivery update.
L Brands Inc.(LB) shares tumbled 13% as Victoria's Secret's parent company posted a 6% drop in June sales (http://www.marketwatch.com/story/victorias-secret-parent-l-brands-shares-fall-after-june-sales-decline-2017-07-06).
Shares of Costco Wholesale Corp.(COST) edged higher after the retailer reported better-than-expected sales numbers for June.
Other markets: The ICE Dollar Index , which measures the buck against a basket of six currencies, was down 0.5%. Gold rose 0.2% and oil futures settled 0.9% higher. (http://www.marketwatch.com/story/oil-bounces-back-after-worst-loss-in-a-month-ahead-of-eia-data-2017-07-06)
Treasury yields moved higher, with the yield on the 10-year note up 5 basis points to 2.37%.
Stock markets in Asia finished mostly weaker, with the Nikkei Stock Average losing 0.4% and European markets also finished lower on signs that the ECB may be prepared to scale back its quantitative easing.
--Carla Mozee contributed to this article.
(END) Dow Jones Newswires
July 06, 2017 15:55 ET (19:55 GMT)