US Markets

Nasdaq posts biggest 2-day slide since December as tech stocks fall

Key Points
  • Tech stocks dragged the Nasdaq composite lower again.
  • Shares of Apple fell after a downgrade, with Amazon, Alphabet, Netflix and Facebook also declining.
  • The Technology Select Sector SPDR ETF (XLK) also broke below its 50-day moving average for the first time since April 18.
Markets open lower as tech stocks take a hit
Markets open lower as tech stocks take a hit

U.S. stocks closed lower on Monday amid renewed pressure on technology stocks.

The Nasdaq composite and the Nasdaq 100 indexes fell 0.52 percent and 0.59 percent respectively, with the composite posting its biggest two-day slide since December. Shares of Apple fell after Mizuho Securities downgraded the stock to neutral from buy. Analyst Abhey Lamba said the best-case scenario is priced into the shares.

Other big tech stocks followed Apple lower, with Amazon, Alphabet, Netflix and Facebook all declining.

"There's an absence of fundamental information to get people more engaged in these names," said Scott Kessler, technology analyst at CFRA. "It's not like earnings season is around the corner."

Also, the Technology Select Sector SPDR ETF (XLK) broke below its 50-day moving average for the first time since April 18.

Tech knocked the S&P and Nasdaq off of record highs Friday, as the best-performing sector of 2017 posted its worst session since May 17.

"The bulls are pointing out that Friday was merely a 'factor' rotation. Out of favor sectors or recent underperformers (like Financials) benefitted at the expense tech," said Peter Tchir, managing director at Brean Capital, in a note sent Monday.

"This was a 'student body left' to 'student body right' sort of swing in sentiment. It seemed unnatural with little catalyst – other than price," Tchir said.

The S&P 500 slipped 0.1 percent, with information technology dropping 0.81 percent to lead decliners. The Dow Jones industrial average fell about 35 points, with Apple contributing the most losses.

A trader works on the floor of the New York Stock Exchange (NYSE).
Lucas Jackson | Reuters

"If you go back to the election, financials took off and then this year tech took the leadership," said Tom Wright, director of equities at JMP Securities. "It'll be interesting to watch whether this is just a blip or if we see continued weakness in these names."

Investors also looked ahead to a key Federal Reserve meeting, where the U.S. central bank is widely expected to raise interest rates. Market expectations for a rate hike were at 95.8 percent Monday, according to the CME Group's FedWatch tool.

Fed officials should also give a nod to the fact that inflation is weaker but that they remain confident about the economy. Fed Chair Janet Yellen is also expected to talk more about how the Fed could move ahead to pare back its massive $4.5 trillion balance sheet later this year.

"The key thing will be how they address the balance sheet," said Mary Ann Hurley, vice president of fixed income trading at D.A. Davidson. "Remember, a reduction in the balance sheet is a form of tightening."

Hurley added she does not expect the Fed to raise rates again in 2017 after this meeting. "We're in the ninth year of an expansion," she said, adding that "the economic data is not strong enough to handle more tightening in the near-term."

Treasurys traded mixed on Monday, with the benchmark 10-year note yield trading near 2.21 percent and the two-year yield hitting a one-month high of 1.355 percent, according to Reuters.

In corporate news, General Electric CEO Jeff Immelt will be stepping down and John Flannery, current president and CEO of GE Healthcare, will take over as chief executive in August. The announcement sent GE shares more than 3.5 percent higher.

Major U.S. Indexes

The Dow Jones industrial average fell 36.30 points, or 0.17 percent, to close at 21,235.67, with Apple leading decliners and General Electric the top advancer.

The declined 2.38 points, or 0.1 percent, to end at 2,429.39, with information technology leading six sectors lower and telecommunications outperforming.

The Nasdaq pulled back 32.45 points, or 0.52 percent, to close at 6,175.46.

Advancers and decliners were about even at the New York Stock Exchange, with an exchange volume of 951.06 million and a composite volume of 4.021 billion at the close.

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 11.4.

—CNBC's Patti Domm contributed to this report.

On tap this week:


FOMC meeting begins

6:00 a.m. NFIB survey

8:30 a.m. PPI


8:30 a.m. Retail sales

8:30 a.m. CPI

10:00 a.m. Business inventories

2:00 p.m. FOMC Statement

2:30 p.m. Fed Chair Janet Yellen briefing


8:30 a.m. Initial claims

8:30 a.m. Import prices

8:30 a.m. Empire state manufacturing

8:30 a.m. Philadelphia Fed survey

9:15 a.m. Industrial production

10:00 a.m. NAHB survey

4:00 p.m. TIC data


8:30 a.m. Housing starts

8:30 a.m. Business leaders

10:00 a.m. Consumer sentiment

12:45 p.m. Dallas Fed President Rob Kaplan