It Was Another Rough Day for Tech StocksBy
Key technical level is breached for the first time in 7 months
Google’s EU fine, delay in health-care bill weighing on stocks
Volatility erupted again in the biggest U.S. technology stocks, sending companies from Nvidia Corp. to Tesla Inc. and Netflix Inc. reeling in bursts of volume that mirrored the rout of two weeks ago.
The Nasdaq 100 Index dropped 1.8 percent, closing at its lowest point of the session, and has fallen 2.3 percent in the last two days for the biggest decline since June 9 and 12. A key technical level, the gauge’s 50-day moving average, was breached at the close for the first time in seven months.
The decline came amid a setback for President Donald Trump’s healthcare agenda, a multibillion-dollar fine for Google and cautious comments about asset valuations by Federal Reserve Chair Janet Yellen.
“This one is concerning as we’re coming off a large decline a few weeks ago,” Frank Cappelleri, a technical analyst at Instinet LLC in New York, said by phone. “There is a potential for a bearish pattern to form.”
Speaking in London, Yellen gave no indication that her plans for continued monetary policy tightening had shifted while acknowledging that some asset prices had become “somewhat rich.” The Nasdaq 100 traded as high as 26.8 times earnings before the mid-June rout occurred, roughly its level in late 2002 as the dot-com bubble was bursting.
In her first public remarks since the U.S. central bank hiked rates on June 14, Yellen said that asset valuations, by some measures, “look high, but there’s no certainty about that.”
“Asset valuations are somewhat rich if you use some traditional metrics like price-earnings ratios, but I wouldn’t try to comment on appropriate valuations, and those ratios ought to depend on long-term interest rates,” she said.
The velocity of selling picked up in U.S. stocks just after 1:30 p.m. New York time as volume in the most-traded futures tracking the S&P 500 Index rose by a factor of almost 20 over a two-minute stretch. The sudden selloff occurred as Senate Majority Leader Mitch McConnell faced mounting pressure to delay this week’s planned debate over his party’s health-care bill.
“You look at that as the first step of a three-step process,” Art Hogan, chief market strategist at Wunderlich Securities said by phone. “If they can get the Senate to pass the bill, then they can move on to tax reforms, which is what the market cares about. Anything that delays that process is disappointing for the market and it rolled over when that happened.”
Almost 40,000 S&P 500 mini futures contracts changed hands from 1:37 p.m. to 1:39 p.m., compared with 2,600 in the previous two minutes, data compiled by Bloomberg show. The number of NYSE stocks trading on downticks outpaced those trading on upticks by 1000 at the worst point of the day, a sign to some that large sell programs had kicked in.
The midday selling was led by tech shares in the FANG block as the Nasdaq resumed a selloff that at its lowest point earlier this month erased more than $250 billion from equity values. Facebook Inc. closed down almost 2 percent, Amazon.com Inc. lost 1.7 percent, Netflix Inc. slid 4.1 percent and Google parent Alphabet Inc. dropped 2.5 percent. Nvidia declined for a fourth day, sinking 3.7 percent, while Tesla retreated 4 percent.
For an industry that already faces investor fleeing 2017’s best-performing stocks, Google’s record-breaking 2.4 billion-euro ($2.7 billion) from European Union fine cast a shadow as EU demanded that the company stop skewing search results to favor its own shopping site.
“The weak link remains tech,” Michael Block, chief strategist at Rhino Trading Partners LLC, said in an interview. “It’s had a huge run, it stalled out two to three weeks ago, and now stories about slowdowns and sustainability are hitting.”