Investments that catapulted U.S. stocks to all-time highs in April turned sour as the month ended, all but erasing gains in the Standard & Poor’s 500 Index.
Health-care stocks, small caps and shares of Apple Inc. and LinkedIn Corp. tumbled as the month wound down, with companies in the biotechnology industry poised for the worst weekly retreat since August 2011. They echoed the fate of popular trades elsewhere, as the dollar and European bonds slid while energy prices rebounded.
“You’ve got oil and the dollar that just throw a monkey wrench in everything,” Joseph Tanious, an investment strategist at Bessemer Trust in Los Angeles, said in a phone interview. The firm oversees more than $100 billion. “I’d not be surprised if we begin to see more positioning and more choppiness.”
Plunging stocks took the shine off a month of records in U.S. equities, with the S&P 500 returning to an all-time high after its longest stretch without one in two years. The Nasdaq Composite Index jumped to its first record since the dot-com bust on April 23 -- only to drop in four of the next five sessions.
Even with the end-of-month retreat, April was no bust for investors. The S&P 500 eked out a gain of 0.9 percent and an index of its 100 biggest companies rose 1.6 percent. The reemergence of mega-cap equities was a theme as the dollar’s rally waned: larger companies beat smaller ones by the most since September, reversing a six-month underperformance.
Declines in the dollar and gains in oil contributed to rallies in energy producers and technology giants like Microsoft Corp. and Intel Corp. Oil shares rallied 6.6 percent for the biggest increase in the S&P 500 as crude bounced after the worst slump since 2008.
Amid the volatility, U.S. equities remain stuck within the tightest range of prices in almost a decade: roughly 125 points in the S&P 500. The peak-to-trough move of 6.3 percent is the smallest at this point of any year since 2006.
The Chicago Board Options Exchange Volatility Index declined 4.8 percent in April, trading within a five-point range the entire month. The gauge of S&P 500 options known as the VIX dropped as much as 20 percent to a four-month low on April 24.
Biotech and social-media companies, viewed by some investors as being in bubble territory, led the late April retreat.
The Nasdaq Biotechnology Index, which has surged 145 percent since 2012, plunged 9.1 percent over five days through Thursday. Biogen Inc. has slumped 13 percent since April 23 and Amgen Inc. lost 6.7 percent.
Yelp Inc., an operator of user-review websites trading at 261 times profit, tumbled 17 percent in April, its eighth straight monthly loss, while unprofitable micro-blogging site Twitter Inc. plunged 22 percent. LinkedIn fell more than 20 percent in after-hours trading Thursday after cutting its profit forecast.
“People are trying to get ahead of the summer swoon,” Randy Warren, who manages more than $100 million at Exton, Pennsylvania-based Warren Financial Service & Associates Inc., said by phone. “It’s not unusual to see a little rotation out of those high-flyers, first and foremost.”
The Russell 2000 Index dropped 2.6 percent in April as investors reversed bets on smaller companies whose domestic focus they hoped would insulate them from the effects of a rallying currency. The measure jumped 14 percent in the previous six months, almost triple the gain in the S&P 500.
The Bloomberg Dollar Spot Index, which tracks the greenback versus 10 major peers, capped its first monthly decline since June after rising in March to the highest level in data going back to 2005.
Apple has slumped 5.7 percent since April 27 for the biggest three-day loss since January 2014 as concern grew that the rapid growth of the iPhone will wane. The company is said to have found a defect in a key component of its watch during production, forcing it to limit supply of the new device, the Wall Street Journal reported.
Among S&P 500 industries, energy stocks ranked No. 1 in April, capping the best month since the start of 2013, after their 14 percent decline from September to March was the worst of all groups. Health-care fell to the bottom with a 1.4 percent loss, only its fifth monthly decline the past 20.
The shift from winners to losers happened globally. In Europe, Greece’s ASE Index jumped 6.1 percent for the best performance after losing 42 percent in the previous 12 months. The DAX index for German stocks, up 22 percent in the first quarter, sank 4.3 percent.
The MSCI Asia Pacific Index rose 4.8 percent in April, the first time it’s beaten both the S&P 500 and the European benchmark measure since July. Stock gauges in Shanghai and Hong Kong posted some of the world’s biggest gains, climbing to levels not seen in seven years as China’s slowing economy buoyed expectations for additional stimulus.
Rotations will continue because earnings growth is slowing amid expanding valuations, according to Daniel Genter, who oversees about $4.7 billion as chief executive officer at Los Angeles-based RNC Genter Capital Management. The S&P 500 trades at 18.2 times earnings, near a five year high, and analysts expect profits to drop for the first three quarters of 2015.
“When you’re not going to have a rising tide raising all ships, then you need to go to specific islands to try to get more returns,” Genter said in a phone interview. “And as you take bigger bets and get more concentrated, it causes rotation and momentum as you see these sectors begin to move.”