Late Drop Leaves Stocks Lower Tuesday 05/18 16:05
Stocks closed lower on Wall Street Tuesday as a late-afternoon sell-off in
technology companies helped nudge stock indexes into the red for the second
(AP) -- Stocks closed lower on Wall Street Tuesday as a late-afternoon
sell-off in technology companies helped nudge stock indexes into the red for
the second straight day.
The S&P 500 lost 0.9%, with most of the pullback coming in the last hour of
trading. Apple, Facebook and Google's parent company all lost 1% or more as
technology stocks fell broadly. While they powered the market rebound last
year, tech stocks are up only 2.6% this year, the lowest gain among the S&P
500's 11 sectors.
Banks, industrial and communication companies also helped drag the market
lower, easily outweighing small gains by health care stocks, among others.
Energy companies fell the most as the price of U.S. crude oil fell 1.2%.
Treasury yields held steady.
Investors continued to size up the latest batch of company earnings reports,
including quarterly snapshots from Walmart and Home Depot.
Wall Street is also weighing the possibility of more inflation later this
year and economic recovery as the coronavirus pandemic eases. That balancing
act has contributed to a market pullback this month.
"Stocks appear to be in consolidation mode, digesting strong year-to-date
gains on the heels of a superb first-quarter reporting period," said Terry
Sandven, chief equity strategist at U.S. Bank Wealth Management. "We view this
pullback that we're experiencing over the last week or so as within the normal
ebb and flow of a broad market that still has legs to trend higher."
The S&P 500 lost 35.46 points to 4,127.83. The Dow Jones Industrial Average
fell 267.13 points, or 0.8%, to 34,060.66. The tech-heavy Nasdaq dropped 75.41
points, or 0.6%, to 13,303.64. The Russell 2000 index of small company stocks
gave up 16.24 points, or 0.7%, to 2,210.88. Each of the indexes had been up at
some point in the early going.
The broader market made solid gains early in the year as investors bet on an
economic recovery fueled by widespread vaccinations. Expectations were high for
corporate earnings and the latest round of results has been surprisingly good.
Wall Street is now digesting that growth and shifting to a more cautious view.
"Some sort of pause was always inevitable," said Ross Mayfield, investment
strategist at Baird. "Eventually markets see a more challenging landscape ahead
and general uncertainty."
Investors have been worried about whether rising inflation will prove to be
either temporary or whether it will endure. Prices are rising for everything
from gasoline to food as the economy recovers from its more than year-long
The fear is that the Federal Reserve will have to dial back the extensive
support if inflation persists. That includes record-low interest rates and the
monthly purchase of $120 billion in bonds meant to goose the job market and
economy. For all the worries about inflation, many professional investors are
echoing the Federal Reserve in saying that they expect rising prices to be
"I don't think we're entering a new period of structurally higher inflation,
but at the same time its impossible to say it's not one of the main risks
investors face," Mayfield said.
Higher interest rates drag on most of the stock market, but they are
particularly painful for stocks considered the most expensive and those bid up
for profits expected far into the future. This mostly involves technology
stocks, which rose sharply last year and are valued highly on the future
profits those companies could bring in.
Investors have been able to draw encouragement from company earnings
reports, which have been surprisingly good.
"By most metrics you're seeing company financials reflect an economy that's
starting to open up and that's consistent with economic growth," Sandven said.
Retailers are among the last companies to report first-quarter results, with
several of them set to do so this week, including Target and Lowe's.
On Tuesday, Walmart rose 2.2% after the giant retailer's results beat
estimates as online shopping saw significant growth from a year ago, driven in
part by Americans buying online in the pandemic.
AT&T fell 5.8% for the biggest decline in the S&P 500 and continued a
two-day slide after the company announced it would spin off its Warner media
assets into a new company with Discovery Communications. AT&T only finished
acquiring Warner, which includes HBO, CNN, DC Comics and other iconic
properties, in 2018 and its new CEO is pulling an about-face on his