On the calendar Tuesday, producer price index inflation data is expected at 8:30 a.m. ET, and Treasury international capital flows data are scheduled for 9 a.m.
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Stocks sent a mixed message Monday, with momentum names getting crushed, but the Dow rose 43 points at 17,031 and the S&P was off just 1 point at 1984. Both the Nasdaq and Russell 2000 fell more than 1 percent. The worst performing S&P big cap sector was technology, followed by consumer discretionary and health care.
Among internet names, Facebook slumped 3.7 percent, Linked In slid more than 7.6 percent, and Pandora fell more than 4 percent. The U.S. e-commerce giant Amazon was down 2.2 percent. Biotech stocks also traded lower, with the iShares Nasdaq Biotechnology ETF (IBB) off more than 1.2 percent. China ETFs and China shares were also hit, but traders said weak Chinese economic data was also a factor.
"Anyone that wants to make room for Alibaba in their prospective fund would sell some of the high momentum names," said Michael O'Rourke, chief market strategist at JonesTrading. O'Rourke said a Wall Street Journal interview with Benchmark partner Bill Gurley also spooked the sector. Gurley has invested in Uber, Zillow and other web startups, and he said that Silicon Valley and the venture capital community are taking on an excessive amount of risk now, at levels unprecedented since the tech bubble era in 1999. "That gave the market two good reasons to sell."
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The types of stocks that got slammed were the same group that the Fed called out in its Monetary Policy report in July. At the time, it said: "Equity valuation of smaller firms as well as social media and biotechnology firms appear to be stretched."