Nasdaq Shows Steep Drop Amid Weakness Among Tech Stocks

Stocks moved mostly lower during trading on Monday, with the tech-heavy Nasdaq showing a particularly steep drop. The S&P 500 also ended the day firmly in negative territory, while the narrower Dow closed slightly higher.

After falling by more than 200 points in early trading, the Dow edged up 27.37 points or 0.1 percent to 31,521.69. Meanwhile, the Nasdaq plunged 341.42 points or 2.5 percent to 13,533.05 and the S&P 500 slid 30.21 points or 0.8 percent to 3,876.50.

The steep drop by the Nasdaq came as traders moved out of technology stocks amid concerns about the impact of the recent increase in treasury yields.

Electric car maker Tesla (TSLA) plummeted by 8. Percent, while big-name tech companies like Apple (AAPL), Microsoft (MSFT) and Amazon (AMZN) also posted steep losses.

The sell-off came as the yield on the benchmark ten-year note saw further upside on the day, reaching its highest closing level in a year.

Bond yields remain at historically low levels, but the recent increase may still spook investors already concerned that stocks are overbought.

Traders were also looking ahead to two days of Congressional testimony by Federal Reserve Chair Jerome Powell.

Powell is likely to reiterate that the Fed plans to maintain easy monetary policy for the foreseeable future as the economy continues to recover from the coronavirus pandemic.

The Fed has recently signaled that it is not concerned about inflation, suggesting that inflation should exceed its 2 percent target for some time before the central bank considers raising interest rates.

In U.S. economic news, the Conference Board released a report showing a bigger than expected increase by its index of leading U.S. economic indicators in the month of January.

The Conference Board said its leading economic index climbed by 0.5 percent in January after rising by an upwardly revised 0.4 percent in December.

Economists had expected the leading economic index to rise by 0.3 percent, matching the increase originally reported for the previous month.

Sector News

Semiconductor stocks moved sharply lower over the course of the session, dragging the Philadelphia Semiconductor Index down by 3.8 percent.

Substantial weakness was also visible among software stocks, as reflected by the 2.6 percent slump by the Dow Jones U.S. Software Index.

Utilities stocks also showed a significant move to the downside, with the Dow Jones Utility Average tumbling by 1.9 percent to its lowest closing level in well over four months.

Biotechnology, housing and networking stocks also moved notably lower on the day, while considerable strength emerged among gold and energy stocks.

The NYSE Arca Gold Bugs Index spiked by 4.6 percent after ending the previous session at its lowest closing level in eight months. The rebound came as the price of gold for April delivery skyrocketed $31 to $1,808.40 an ounce.

Similarly, energy stocks moved higher along with the price of crude oil, as crude for March delivery jumped $2.25 to $61.49 a barrel amid concerns about supply.

Airline stocks also moved sharply higher over the course of the session, with the NYSE Arca Airline Index soaring by 3.3 percent to its best closing level in a year.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower on Monday, although Japan’s Nikkei 225 Index bucked the downtrend and rose by 0.5 percent. China’s Shanghai Composite Index tumbled by 1.5 percent, while South Korea’s Kospi fell by 0.9 percent.

European stocks also saw modest weakness on the day but closed well off their worst levels. While the French CAC 40 Index edged down by 0.1 percent, the U.K.’s FTSE 100 Index dipped by 0.2 percent and the German DAX Index fell by 0.3 percent.

In the bond market, treasuries drifted lower in the afternoon after showing a lack of direction in morning trading. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.5 basis points to 1.370 percent, its highest closing level in a year.

Looking Ahead

Trading on Tuesday may be driven by reaction to Powell’s testimony, with the Fed chief due to appear before a virtual Senate Banking Committee hearing.

On the earnings front, retail giants Home Depot (HD) and Macy’s (M) are among the companies due to report their quarterly results before the start of trading on Tuesday.