Tech-heavy Nasdaq leads Wall Street lower as megacaps, chips slide By Reuters

By Sinéad Carew and Bansari Mayur Kamdar

(Reuters) -Wall Street stocks fell on Tuesday, with weakness in megacap growth shares such as Apple Inc and the chip sector weighing on the Nasdaq ahead of this week’s slew of economic data and remarks from Federal Reserve Chair Jerome Powell.

Data showed U.S. services industry growth slowed in February as employment declined, but a measure of new orders grew to a six-month high, signaling underlying strength in the sector.

The Purchasing Managers Index report on Tuesday confirmed continued economic growth despite 525 basis points worth of interest rate hikes from the Fed since March 2022.

Another survey showed new orders for U.S.-manufactured goods dropped more than expected in January.

A rally fueled by artificial intelligence fizzled out this week as the focus turned to the next clues on the Fed’s monetary policy path after signs of sticky inflation in February dampened hopes of early interest rate cuts.

“Markets are softer today with a bit more risk-off tone overall,” said Craig Fehr, head of investment strategy at Edward Jones in St. Louis.

Two reports hurt tech stocks, Fehr said. A research report showed iPhone sales in China fell 24% year-on-year in the first six weeks of 2024 as Apple faced increased competition from domestic rivals such as Huawei. Apple shares (NASDAQ:) were down 2.9% after the report.

A Bloomberg News report on Monday depressed the chip sector, he added. Advanced Micro Devices (NASDAQ:) shares fell 1.3% on the news that it has hit a roadblock in its efforts to sell an AI chip tailored for the Chinese market as Washington cracks down on advanced technology exports to Beijing.

Chip rivals fell in sympathy with the Philadelphia semiconductor index, down 2.8%.

While technology, down 2.7%, led declines among the ‘s major industry sectors on Tuesday, the sector was still up roughly 10% so far in 2024 after rising 56% in 2023.

“A little bit of the weakness we’re seeing in technology today is a function of the strength we’ve seen,” said Fehr. “It’s reasonable and even healthy to take some pit stops along the way. This is market is to a degree, stopping for a breather after what’s been a very sharp run higher. ”

The fell 406.15 points, or 1.04%, to 38,583.68. The S&P 500 lost 58.51 points, or 1.14%, at 5,072.44 and the dropped 304.48 points, or 1.88%, to 15,903.03.

The benchmark S&P 500 had hit a fresh intraday record high on Monday before closing slightly lower in the run-up to Powell’s testimony before lawmakers on Wednesday and Thursday.

Investors are also waiting for clues about interest rate policy from economic data, including the crucial non-farm payrolls report, due out on Friday.

Traders see a 67.2% chance of the first rate cut this year in June, as per CME Group’s (NASDAQ:) FedWatch tool.

Seven of the 11 major S&P 500 indexes declined while energy, up 1% and consumer staples, up 0.6%, were the biggest gainers.

Among megacap technology stocks, Tesla (NASDAQ:) shares dropped 4% after its European Gigafactory near Berlin halted production following a suspected arson attack.

On the bright side, Target shares jumped more than 12% after the big-ticket retailer forecast annual comparable sales largely above estimates, betting on same-day services, product launches and a new membership program to boost spending.

Microstrategy (NASDAQ:) shed 15% after the bitcoin development company announced a private offering for $600 million in convertible senior notes, with proceeds to be used to buy bitcoin.

Declining issues outnumbered advancers on the NYSE by a 1.13-to-1 ratio; on Nasdaq, a 1.57-to-1 ratio favored decliners.

The S&P 500 posted 49 new 52-week highs and six new lows; the Nasdaq Composite recorded 87 new highs and 99 new lows.