Wall Street dropped sharply on Tuesday as concerns over marquee companies warning of higher costs were exacerbated by the benchmark U.S. 10-year Treasury yield piercing the 3-per-cent level for the first time in four years.
Google-parent Alphabet sank 4.9 per cent, erasing all its gains for the year, as investors focused on rising costs at the company rather than the profit beat.
The other FAANG members, which had powered the stock market to record highs, also fell. Facebook declined 3.7 per cent, Amazon dropped 4 per cent and Netflix declined 4.2 per cent.
“Given the weakness in Google, you’re seeing profit taking in rest of the FAANG stocks ... a spillover into some of the other tech names,” said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.
“Those five names are enough to weigh on Nasdaq and tech stocks.”
Apple was down 1.7 per cent, falling for the fifth straight session as results from its suppliers continue to feed fears of slowing demand for iPhones.
Chipmaker AMS warned of a downturn this quarter owing to weaker orders from a main customer that analysts said was Apple. Corning said it expects weak demand for phone screen glass to spill into the current quarter.
The technology sector sank 2.1 per cent, making it the biggest drag on the S&P and Nasdaq.
At 1:58 p.m. EDT the Dow Jones Industrial Average was down 564.48 points, or 2.2 percent, at 23,902.21 the S&P 500 was down 43.65 points, or 1.6 per cent, at 2,626.43 and the Nasdaq Composite was down 139.57 points, or 2 per cent, at 6,987.
Adding to nerves, was the yield on the 10-year U.S Treasury bonds hitting 3 per cent for the first time since 2014, before easing off, due to a growing supply of government debt and accelerating inflation as commodity prices gained.
Most market strategists said the mark was more a technical or psychological level than anything else.
“These higher Treasury yields are providing competition with riskier fixed-income products and things like REITs and dividend-producing stocks,” said Bill Northey, senior vice president with U.S. Bank Wealth Management in Helena, Montana.
Caterpillar was down about 4 percent, reversing course from earlier in the session after it beat profit estimates and raised its earnings forecast.
TSX fell slightly Wednesday as gains in Canadian National Railway’s shares boosted industrial stocks and steadying gold prices lifted precious metals miners.
The Toronto Stock Exchange’s S&P/TSX Composite Index fell 79.86 points, or 0.51 per cent, to 15,473.99.
CN Rail rose 0.3 per cent, providing the biggest boost to Canada’s main index. The country’s largest railroad posted a fall in quarterly profit on Monday, but some analysts said its operational challenges were likely to ease this year.
Also boosting the index was a 3.9-per-cent increase in Restaurant Brands International Inc’s shares after the Burger King owner posted a better than expected profit.
Centerra Gold was up 3.2 per cent after Chaarat Gold Holdings offered to buy the company’s gold mine Kumtor, the largest in Kyrgyzstan.
Reuters