U.S. stocks fell, pushing the Nasdaq 100 Index to its biggest three-day retreat since 2011, as technology and consumer shares extended last week’s slide. European equities fell from a six-year high and Treasuries rose.
The Standard & Poor’s 500 Index lost 1.1 percent at 4 p.m. in New York, falling to a three-week low that erased the gauge gain for the year. The Nasdaq 100 slid 0.9 percent for a three-day slide of 4.3 percent. The Stoxx Europe 600 Index sank 1.2 percent, the most in a month. Treasuries advanced to the highest level in more than a week.
Technology shares have been hit as traders dump the biggest winners of the bull market amid concern valuations have advanced too far. The Russell 2000 (RTY) Index of small companies has lost 6 percent since a March 4 record. Alcoa Inc., the largest U.S. aluminum producer, unofficially kicks off the U.S. quarterly earnings season when it releases financial results tomorrow. Bonds rose as investors speculate lower-than-estimated U.S. jobs growth won’t prompt the Federal Reserve to accelerate stimulus cuts.
“It’s a carryover from Friday’s selloff,” said Wes Mills, chief investment officer with Scotia Private Client Group in Toronto. His firm manages about C$14 billion. “It’s a risk-off move. Markets had risen to the point where people are a little skittish and locking in profits ahead of the earnings season.”
Consumer stocks fell 1.9 percent, the most among the 10 main S&P 500 groups, after dropping 1.7 percent on April 4. The industry has lost 5.9 percent since a record close on March 6. The S&P 500 Consumer Discretionary Index trades at 20 times earnings, about three points higher than the ratio for the benchmark gauge.
The Dow Jones Industrial Average dropped 1 percent as Nike Inc. and Goldman Sachs Group Inc. lost at least 2.8 percent for among the biggest slides. The Dow had briefly erased its loss for the year on April 3 before joining the broader selloff.
“If you take a closer look under the hood, things have been deteriorating for a while now,” Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research in Cincinnati, wrote in an e-mail. “Small caps and tech have been breaking down all over the place the past month, with the big blue chips holding tough. Well, now it looks like the last place bulls were hiding is finally starting to crack.”
Investors will turn to first-quarter earnings this week, JPMorgan Chase & Co. and Wells Fargo & Co. among the S&P 500-listed companies scheduled to report. Profit for members of the gauge probably climbed 1 percent in the period, analysts now forecast, after anticipating a 6.6 percent rise in January. Sales rose 2.9 percent on average, according to estimates compiled by Bloomberg.
The Nasdaq Composite (CCMP) Index, which slid the most in two months on April 4, trades at 31.5 times reported earnings of the companies in the index. That’s almost twice the ratio for the S&P 500, which trades at 17 times earnings. The technology gauge fell a third day, losing 1.2 percent to a two-month low. It has dropped 6.4 percent since a March 5 high.
The selling in the Nasdaq 100 Index has sent anxiety among options traders to the highest levels since the flash crash four years ago. More than 1 million bearish options on an exchange-traded fund tracking the index of technology stocks changed hands that day for the most trading in puts since May 7, 2010, the day after $862 billion was erased from the value of U.S. equities in a matter of minutes.
“Will investors see this as opportunity to buy the dip, or do they stay on the sidelines and wait to see earnings strength in the first quarter?” Kate Warne, a St. Louis-based investment strategist at Edward Jones & Co., which manages $787 billion, said by phone. “The fundamentals remain pretty good, but sentiment can change quickly, as we saw on Friday.”
Hedge funds that invested heavily in technology shares took a beating in the first quarter as popular holdings such as Chinese Internet company Baidu Inc. fell 14 percent and online retailer Amazon.com Inc. tumbled 15 percent.
Paul Tudor Jones, Michael Novogratz and Louis Bacon, hedge-fund managers that profited last year from bets on macroeconomic trends, posted losses in the period as some of those trades turned against them. The losses for macro managers have caused them to cut some of their bigger bets, Anthony Lawler, a money manager at he $120 billion Swiss firm GAM, wrote in a report last week.
Mark Mobius, who oversees about $50 billion at Templeton Emerging Markets Group, said he’s buying technology stocks after a global rout left companies such as Tencent Holdings Ltd. (700) trading at “reasonable” valuations.
“If you look at Tencent for example, it’s come down about 20 percent and that’s a pretty good correction,” Mobius, whose Templeton Asian Growth Fund (TEMFRBI) outperformed 88 percent of peers this year, said in an interview in Bloomberg’s Hong Kong office, declining to name specific stocks he’s buying.
Tencent fell 4.5 percent at the close in Hong Kong today, extending its drop from a March 6 record to 21 percent.
European technology shares also slumped. A gauge of technology stocks in the Stoxx 600 lost 2 percent, the biggest decline among 19 industry groups, with ARM Holdings Plc falling 2.3 percent and Nokia Oyj sliding 4 percent, the most since January.
“European markets are following the negative close in the U.S.,” said Benno Galliker, a trader at Luzerner Kantonalbank AG in Lucerne, Switzerland. “The favorites of the past few months, such as technology and biotechnology stocks, seem to be losing some of the glamor.”
Yields on Treasury 10-year notes fell three basis points to 2.69 percent after the rate dropped eight basis points on April 4. Investors bet jobs growth is slow enough to deter the Federal Reserve from accelerating cuts in its bond-purchase program.
U.S. debt extended a rally from April 4 when a report showed U.S. employers added 192,000 jobs last month, less than the 200,000 projected by a Bloomberg News survey of economists. The Fed is scheduled to release the minutes of its March 18-19 meeting on April 9, after using the session to make a third cut to the debt-purchase program designed to support the economy. The U.S. is scheduled to sell $64 billion of notes and bonds this week.
The S&P GSCI index of 24 commodities sank 0.4 percent, halting two days of gains. West Texas Intermediate crude retreated after Libyan rebels surrendered control of two oil ports to the government, enabling the OPEC country to increase exports.
WTI for May delivery decreased 0.6 percent, to $100.57 a barrel on the New York Mercantile Exchange.
Gold futures for June delivery lost 0.4 percent to settle at 1,298.30 on the Comex in New York as investors speculated the Fed won’t slow its bond buying.
Nickel rose for a sixth straight session in London after OAO GMK Norilsk Nickel, the world’s largest producer of the refined metal, said the market may face a shortage as early as the third quarter. Nickel for delivery in three months gained 0.1 percent to settle at $16,410 a metric ton.
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