Wall Street drops as tech stocks slide

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(Reuters) – U.S. stocks dropped on Monday as marquee technology companies continued to slide on growth concerns, with losses being curbed by a rise in energy firms on higher oil prices and in financials ahead of the Federal Reserve meeting.

Traders work on the floor of the New York Stock Exchange shortly after the opening bell in New York, U.S., July 27, 2018. REUTERS/Lucas Jackson

The technology index has been under pressure after underwhelming forecasts from Facebook (FB.O), Intel (INTC.O) and Twitter (TWTR.N) threw up questions about the growth prospects of a sector whose surge has propelled the stock market to record highs.

Apple (AAPL.O), which was trading higher premarket, fell 0.5 percent and is due to report earnings on Tuesday after the bell, the only one of the so-called FAANG group that is yet to report.

Other FAANG members also declined: Facebook fell 3.2 percent, Amazon (AMZN.O) declined 0.8 percent, Alphabet (GOOGL.O) dropped 1.8 percent, while Netflix (NFLX.O) slid 4.3 percent.

“The theme that has started to emerge after seeing results from Facebook, Amazon and Netflix is that we have reached a saturation point among the FAANG stocks,” said Michael Antonelli, managing director, institutional sales trading at Robert W. Baird in Milwaukee.

“The market has had a heck of a run over the last week or so and with only 13 S&P components reporting today, people are expecting the day to be quieter.”

Six of the 11 major S&P sectors were lower, led by the technology sector’s .SPLRCT 1.35 percent drop.

Caterpillar’s shares (CAT.N) were flat, pulling back from gains of nearly 3 percent premarket after it reported a second-quarter profit that beat estimates and the heavy equipment maker raised its full-year profit outlook.

The S&P energy sector .SPNY jumped 0.85 percent as oil prices gained with investors remaining cautious over supply outlook. [O/R]

At 10:15 a.m. EDT the Dow Jones Industrial Average .DJI was down 15.51 points, or 0.06 percent, at 25,435.55, the S&P 500 .SPX was down 7.90 points, or 0.28 percent, at 2,810.92 and the Nasdaq Composite .IXIC was down 67.60 points, or 0.87 percent, at 7,669.82.

Still, advancing issues outnumbered decliners for a 1.27-to-1 ratio on the NYSE and a 1.02-to-1 ratio on the Nasdaq.

The Federal Reserve meets on Tuesday and Wednesday and is expected to keep rates unchanged and reaffirm outlook for further rate hikes. The market has almost fully priced in a September hike and is leaning towards a further move before the end of the year.

Financial stocks .SPSY gained 0.45 percent, led by a 1 percent or more increase in J.P. Morgan (JPM.N), Bank of America (BAC.N) and Citigroup (C.N).

But, American Express (AXP.N) fell 2.5 percent after the Wall Street Journal reported the company raised currency conversion rates for its business clients without notifying.

Tyson Foods (TSN.N) dropped 5.6 percent, after the company cut its full-year profit forecast, saying uncertain trade policies and higher tariffs hurt domestic and export prices, specifically for chicken and pork.

The warning also weighed on the shares of Hormel Foods (HRL.N), Sanderson Farms (SAFM.O) and Pilgrim’s Pride (PPC.O), which fell between 0.3 and 1.9 percent.

The S&P index recorded 12 new 52-week highs and two new lows, while the Nasdaq recorded 19 new highs and 51 new lows.

Reporting by Amy Caren Daniel in Bengaluru; Editing by Shounak Dasgupta

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