NEW YORK: The S&P 500 and the Nasdaq fell to over one-month lows on Tuesday, as technology stocks lost momentum, with investors turning cautious ahead of inflation data and a highly anticipated SpaceX IPO later this week.
Shares of chipmakers Nvidia, Broadcom and Micron Technology dropped between 3.5 percent and 7 percent. The Philadelphia SE Semiconductor index fell almost 7 percent after rising as much as 3 percent in early trading.
The S&P 500 tech index shed 4.4 percent following a short-lived bounce on Monday.
Technology and AI-linked stocks sold off sharply on Friday after Broadcom’s disappointing forecast fueled concerns about high valuations in the sector, particularly in chipmakers, which have rallied strongly this year.
“Tech stocks - that’s where a lot of the growth and momentum has been during this recent leg of the rally,” said Jordan Rizzuto, CIO at GammaRoad Capital Partners.
“They are typically the most rate sensitive. And so it’s no surprise that with increased uncertainty around rate expectations… tech, particularly, is seeing some profit taking.”
A stronger-than-expected jobs report on Friday added to concerns that the Federal Reserve will raise interest rates this year. Traders are pricing in a 43 percent chance of a 25 basis point rate hike in December, as per CME Group’s FedWatch tool.
Investors are now awaiting consumer prices data for May, which could offer fresh clues on how the rise in energy prices, driven by the war in Iran, is impacting inflation. The data is due on Wednesday.
Oil prices
tumbled more than 4 percent after Iran and Israel said they had halted attacks on each other following an appeal from US President Donald Trump.
At 12:13 p.m. ET, the Dow Jones Industrial Average fell 294.03 points, or 0.58 percent, to 50,497.17, the S&P 500 lost 108.95 points, or 1.47 percent, to 7,296.78 and the Nasdaq Composite lost 658.24 points, or 2.54 percent, to 25,271.42.
SpaceX’s market debut on Friday could also be a hurdle for US stocks as investors worry about possible overexuberance among high-growth technology stocks. Elon Musk’s SpaceX is aiming to raise USD75 billion and targeting a valuation of USD1.75 trillion, the most ever for an IPO.
Paul Nolte, senior wealth advisor and market strategist for Murphy & Sylvest, said investors are potentially booking profits in the high-flying semiconductor stocks to make room for SpaceX in their portfolios.
Among other movers, packaged food maker J.M. Smucker rose 12 percent after forecasting annual profit above Wall Street expectations.
Cancer drug developer Nuvalent surged 35 percent after GSK agreed to buy the company for USD10.6 billion, valuing Nuvalent at about USD124 per share, a 40 percent premium to the stock’s last closing price.
Advancing issues outnumbered decliners by a 1.08-to-1 ratio on the NYSE, and on the Nasdaq, declining issues outnumbered advancers by a 1.25-to-1 ratio.
The S&P 500 posted 26 new 52-week highs and six new lows, while the Nasdaq Composite recorded 135 new highs and 102 new lows.