NEW YORK: The Dow and S&P 500 reversed course to trade lower on Friday, while the Nasdaq fell more than 1% after comments on stimulus tapering from Federal Reserve Chair Jerome Powell spooked markets trading at record levels. The Dow and the S&P 500 had hit record highs earlier in the session on positive earnings from American Express, before Powell said that the US central bank is "on track" to begin reducing its purchases of assets.
"Every time he (Powell) has been talking about tapering so far, markets haven't been bothered by it, but now at record highs investors tend to be just a little bit more sensitive to such news," said Randy Frederick, managing director of trading and derivatives for Charles Schwab in Austin, Texas.
The benchmark S&P 500 index is still set for its third straight week of gains, rising about 1.4% this week. Seven of the 11 major S&P 500 sector indexes were still higher by early afternoon, while the communication services sector fell over 2% as it was hit by a slump in social media giants.
Facebook Inc fell 5.7% and Twitter Inc lost 4.4% after Snap Inc said privacy changes by Apple Inc on iOS devices hurt the company's ability to target and measure its digital advertising. Snap plummeted 25.3% on the news and cast doubts over quarterly reports next week from Facebook and Twitter, social media firms that rely heavily on advertising revenue.
"That's going to change things for the whole industry but they're (Big Tech) going to adapt just fine," said Todd Lowenstein, chief equity strategist of The Private Bank at Union Bank. "Right now investors don't like uncertainty. When you don't have a line of sight on things it causes volatility, and investors to question some of the investment around some of these companies."
American Express Co jumped 4.9%, the biggest boost to the Dow Jones Industrial Average, as it beat profit estimates for the fourth straight quarter. Intel Corp tumbled 11.2% as it missed third-quarter sales expectations, while its chief executive officer pointed to shortages of chips holding back sales of its flagship processors. Supply chain worries, inflationary pressures and labor shortages have been at the forefront of the third-quarter earnings season.