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U.S. Stocks Drop Following Tech Slide

U.S. stocks fell Tuesday with last week’s slide in giant tech stocks resuming after the Labor Day holiday.

The tech-heavy Nasdaq Composite Index slumped 2.9% after a bout of volatility last week led to big drops in the index. The S&P 500 fell 1.8%. The Dow Jones Industrial Average lost 400 points, or 1.4%.

Among the technology stocks declining were those that have driven much of the market’s gains this year and benefited from the stay-home orders aimed at slowing the coronavirus pandemic. Apple retreated 4.5%,

Amazon.com

declined 3.7% and

Facebook

fell 3.2%. Chip maker

Nvidia

tumbled 5.6% and video-chat software company Zoom Video Communications fell 3.9%.

Tesla fell more than 15% after the S&P Global late Friday passed over the electric car maker for inclusion in the S&P 500, which many had bet would give it another lift.

“I think we should start to anticipate a rotation, the momentum behind tech is going to ease,” said Seema Shah, chief strategist at

Principal Global Investors.

“As we’re seeing easing lockdowns and the prospect of a vaccine, people are beginning to go back to a more normal way of life and reliance on tech is starting to fade from the peak where it was at the height of the lockdown.”

Bucking the downward trend, shares of

General Motors

jumped 6.5% after it formed a strategic partnership with battery and hydrogen-powered vehicle maker Nikola to jointly develop an electric truck. Nikola shares surged 25%.

As traders return from the holiday weekend that typically signals the end of summer breaks, the economy and the U.S. election will be in focus.

“Typically, bubbles are unwound when the Fed takes away the punch bowl. Obviously, this is very unlikely to happen anytime soon,” strategist Chris Senyek of Wolfe Research wrote Tuesday. “However, this bubble can still be unwound by sustained economic disappointments!”

Oil prices extended their drop on concerns demand is slumping amid a still uneven economic recovery. Saudi Arabia signaled an expectation for reduced demand over the weekend by cutting prices. Global benchmark Brent crude fell 4.7% to $40.04 a barrel. The U.S. WTI dropped 6.7%.

The yield on benchmark 10-year Treasury notes on Tuesday fell to 0.676%, from 0.720% on Friday, as some investors sought safety.

Also weighing on markets Tuesday are an uptick in economic tensions between the U.S. and China.

President Trump said in a Monday press conference that he was considering “decoupling” from China and wasn’t seeking to bring outsourced jobs back to the U.S. The comments are the latest twist in a multiyear spat between the two largest economies in the world that have centered around technology, security and jobs.

“Decoupling is an economic concept not a political concept,” said Sebastien Galy, a macro strategist at Nordea Asset Management. “These have the potential to be very significant moves.”

Chinese Foreign Minister Wang Yi announced an initiative on Tuesday seeking to set global standards on data security, in response to accusations by Washington over what the Trump administration deems to be national-security threats by Chinese companies such as Huawei Technologies and Tencent Holdings.

In Asia, major benchmarks rose, with the Shanghai Composite Index and Korea’s Kospi index both closing up 0.7%. Japan’s Nikkei 225 ticked up 0.8% after the government released its revised gross domestic product figures for the second quarter, which were moderately better than economists’ expectations.

The pan-continental Stoxx Europe 600 slipped 1.86% as another round of Brexit trade negotiations between the U.K. and the European Union are set to begin on Tuesday. Prime Minister Boris Johnson has set an Oct. 15 deadline to strike a deal and tensions are expected to simmer in the final weeks ahead of the deadline. The pound weakened 0.9% against the euro.

Tesla’s booth at the China International Fair for Trade in Services in Beijing on Monday.



Photo:

Pan Siwei/Zuma Press

“Sterling is definitely under short-term pressure,” said Russell Silberston, investment strategist at Ninety One. “If the range of possible outcomes suggests we are going to move toward a hard Brexit, I wouldn’t be surprised to see the euro rally and the sterling fall.”

Apple reached a staggering $2 trillion market valuation in August, despite years of doubt from critics over whether the tech giant could continue to succeed after the death of Steve Jobs. Here’s a look at Apple’s rise to the very top. Illustration: Jacob Reynolds/WSJ

Write to Anna Hirtenstein at [email protected]

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