U.S. Stocks Lower on Technology Weakness

By Jon Sindreu And Akane OtaniFeaturesDow Jones Newswires

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

The Dow Jones Industrial Average fell 10 points, or less than 0.1%, to 21444 shortly after the opening bell. The S&P 500 lost 0.2% and the Nasdaq Composite fell 0.7%, dragged lower by sliding technology stocks.

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Major indexes have risen to fresh highs in the first half of the year, bolstered by strong corporate earnings and a rally in tech shares, which have been the best-performing sector in the S&P 500 this year.

Yet many investors say they are more cautious about the path for stocks the rest of the year. 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.

"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."

Stock losses were broad Thursday, with all but two of the S&P 500's 11 sectors posting declines in early trade. Technology shares fell 0.9% in the S&P 500, with Google parent Alphabet, Microsoft and chip-maker NVIDIA losing more than 1% each.

Financial shares outperformed the broader market, 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.

Shares of Citigroup, Morgan Stanley and Bank of America were all up more than 2%, while the yield on the 10-year U.S. Treasury note rose to 2.290% 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 0.3% against the U.S. dollar.

The Stoxx Europe 600 was down 1.2%, with broad losses across sectors offsetting a rally 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 for investors 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.

Tim Graf, a senior strategist at State Street, said that interest rates around the world "are still pretty negative" once inflation is taken into account, which "is good for risky assets.

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.

Kenan Machado contributed to this article.

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

(END) Dow Jones Newswires

June 29, 2017 10:22 ET (14:22 GMT)