US Markets

Tech stocks plunge, Dow closes 168 points lower

Key Points
  • The tech sector shed 1.8 percent to drag the broader market lower.
  • The S&P 500 declined 0.9 percent and briefly broke below its 50-day moving average for the first time since May 18.
  • Thursday also marked the next-to-last trading day of the quarter, usually a time when investors reposition their portfolios or take profits.
Tumbling tech drags market lower, wipes out big bank gains

U.S. equities fell on Thursday as technology's latest drop washed out strong gains from the big banks.

Shares of Facebook, Amazon, Netflix, Apple and Google-parent Alphabet all dropped more than 1 percent. Chip stocks also fell, with Nvidia and Advanced Micro Devices closing 3.3 percent and 4.8 percent lower, respectively.

The Dow Jones industrial average fell 168 points with Apple, Boeing, and 3M contributing the most losses. The 30-stock index briefly fell more than 250 points earlier int he session.

The S&P 500 pulled back 0.9 percent, with information technology sliding 1.8 percent. The S&P also traded below its 50-day moving average for the first time since May 18. The Nasdaq composite lagged, falling 1.4 percent.

Tech stocks have "shown a little bit of weakness in the past few weeks and now quarter-end is spooking the tourists in these names, if you will," said Jeremy Klein, chief market strategist at FBN Securities.

Thursday also marked the next-to-last trading day of the quarter, usually a time when investors reposition their portfolios or take profits.

Tech has been the best-performing sector for most of 2017, rising more than 15 percent in the period. But over the past month it has dropped nearly 2 percent.

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

"This is really just a reversion to the mean," said Tom Martin, senior portfolio manager at Globalt. "We think once the sector comes back from its high levels, it will be a sort of buy-the-dip dynamic."

The drop in tech negated gains from the big banks, which followed the Federal Reserve not objecting to the capital repurchase programs from the banks they examined.

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, jumped 14.1 percent to trade near 11.44. However, the index's gains may be short-lived, according to Andrew Thrasher, portfolio manager for The Financial Enhancement Group.

"Tuesday saw a double-digit gain in the VIX that was then given back as volatility was sold yesterday," Thrasher said in an email, adding: "The theme has been for volatility sellers to step in late in the day."

Still, he did note that "today we are seeing one of the highest levels in spot VIX so far this month."

Elsewhere, yields continued to climb higher on Thursday, with the benchmark 10-year note yield trading near 2.26 percent; it started the week around 2.15 percent.

"The bond market had very low expectations for higher interest rates this year," said Michael Arone, chief investment strategist at State Street Global Advisors, noting the market doubted central banks would be able to tighten monetary policy as much as they had hoped. "Now, with Draghi's comments, they're re-evaluating those possibilities."

Earlier this week, European Central Bank President Mario Draghi said: "The threat of deflation is gone and reflationary forces are at play," sending European yields higher and dragging their U.S. counterparts with them.

The ECB tried to walk back those comments later in the week, but the sell-off in the U.S. and European bond markets did not abate.

In economic news, the U.S. economy grew at an annualized rate of 1.4 percent in the first quarter, according to the Commerce Department's final first-quarter GDP read.

Weekly jobless claims, meanwhile, came in at 244,000 for last week, slightly above the expected 240,000.

Major U.S. Indexes

The Dow Jones industrial average fell 167.58 points, or 0.78 percent, to close at 21,287.03, with Cisco Systems the biggest decliner and JPMorgan and Goldman Sachs the only risers.

The dropped 20.99 points, or 0.86 percent, to end at 2,419.70, with information technology leading nine sectors lower and energy and financials advancing.

The Nasdaq pulled back 90.06 points, or 1.44 percent, to close at 6,144.35.

About three stocks declined for every advancer at the New York Stock Exchange, with an exchange volume of 947.56 million and a composite volume of 7.93 billion at the close.