Tech shares lead Nasdaq lower

Bloomberg NewsApril 11, 2014 

NEW YORK -- U.S. stocks tumbled Thursday, with the Nasdaq Composite index falling the most since 2011, as a technology selloff resumed amid concern valuations may be too high at the start of earnings season.

Bed Bath & Beyond erased 6.2 percent after predicting quarterly profit below estimates. A gauge of Internet stocks tumbled the most since 2011, while biotechnology shares approached a bear market. EBay dropped 3.2 percent after reaching a deal with Carl Icahn to end his proxy fight by agreeing to add another independent director to the board.

The Nasdaq Composite tumbled 3.1 percent, erasing a two-day rally. The Standard & Poor's 500 index fell 2.1 percent, its largest slide in two months, to 1,833.08. The Dow Jones industrial average dropped 266.96 points, or 1.6 percent, to 16,170.22. The Russell 2000 index of smaller companies lost 2.8 percent. Treasuries rose, with the 10-year yield dropping five basis points to 2.65 percent.

The S&P 500 has slumped 3.1 percent from a record reached April 2, closing Thursday below its average level in the past 50 days for the first time since Feb. 10. Investors returned Thursday to selling the biggest winners in the five-year U.S. bull market. The Nasdaq Composite trades at 35 times reported earnings of the companies in the index. That's double the ratio for the S&P 500, which trades at about 17 times earnings.

The S&P 500 Information Technology index dropped 2.5 percent Thursday, with the Dow Jones Internet composite index plunging 4.2 percent. TripAdvisor fell 7.1 percent. The online travel research company jumped 98 percent in 2013.

Facebook, which doubled last year, erased 5.2 percent Thursday. Yahoo slipped 4.2 percent.

The Nasdaq Biotechnology index slipped 5.6 percent, the biggest drop since 2011. The gauge has fallen 19 percent after reaching an all-time high on Feb. 25. Alexion Pharmaceuticals Inc. dropped 7.5 percent, the most in the S&P 500. The drugmaker, which trades at 101 times reported earnings, rallied 42 percent last year.

The Chicago Board Options Exchange volatility index, a gauge for U.S. stock volatility known as the VIX, advanced 15 percent to 15.89, poised for the largest gain since Feb. 3. The index has climbed 16 percent this year.

About 7.4 billion shares changed hands on U.S. exchanges, 6.4 percent above the three-month average.

All 10 major industries in the S&P 500 declined, with industrial, commodity, consumer-discretionary, financial and health-care companies joining technology in posting drops of more than 1.3 percent.

American Express erased 3.8 percent, the most since June 2012, to lead declines in the Dow. JPMorgan Chase & Co. slid 3.2 percent as the KBW Bank Index lost 3 percent. Walt Disney dropped 3.7 percent, its largest slide since November 2012.

The S&P 500 climbed 1.1 percent Wednesday as minutes from the Federal Reserve's last meeting eased concern about the timing of an interest-rate increase. Several members said a rise in their projection for the benchmark interest rate exaggerated the likely speed of tightening. Treasury yields rose last month after policy makers predicted the rate would rise faster than previously forecast.

Three rounds of Fed stimulus and lending rates near zero have helped fuel economic growth, sending the S&P 500 surging as much as 180 percent from its 2009 low.

A government report Thursday showed the fewest number of Americans since before the last recession filed applications for unemployment benefits last week, pointing to more progress in the labor market. Data last week boosted optimism that the economy is shaking off the effects of severe winter weather and building momentum into the second quarter. The government's jobs report on April 4 showed employers boosted hiring last month and the unemployment rate held at 6.7 percent.

Stock futures fell earlier Thursday after data showed China's exports and imports unexpectedly fell in March, adding to concern that expansion in the world's second-largest economy will deteriorate further. Premier Li Keqiang said the nation will roll out more policies to support growth while avoiding stronger stimulus.

Alcoa this week unofficially began the quarterly earnings-reporting season as it posted profit that beat analysts' estimates. Profit for members of the S&P 500 probably climbed 1 percent in the first quarter, analysts now forecast, after anticipating a 6.6 percent rise in January. The companies' sales climbed 2.9 percent, the projections show.

JPMorgan Chase & Co. and Wells Fargo & Co. are scheduled to report earnings Friday.

Bed Bath & Beyond slid 6.2 percent to $63.72. The retailer said first-quarter earnings will be 92 cents to 96 cents a share, missing the $1.02 average prediction of analysts in a Bloomberg survey.

EBay lost 3.2 percent, the most since November, to $54.08. Icahn, who took a stake in EBay in January and began campaigning to split off the PayPal payments unit, agreed to withdraw his PayPal proposal and his two board nominees ahead of the company's upcoming annual meeting.

Rite Aid jumped 8.4 percent to $6.94 after saying it expects full financial-year sales of $26 billion to $26.5 billion, exceeding the $25.78 billion-average of analysts surveyed by Bloomberg. The drugstore-chain operator also reported fourth-quarter adjusted earnings that surpassed the average analyst estimate.

Investors have added $5.4 billion to U.S. equity exchange- traded funds in the past five days and added $464.4 million to American bond ETFs, data compiled by Bloomberg show. Energy stocks absorbed the most money among industry ETFs, taking in $513 million during the past week. Technology ETFs lost $1.2 billion in the past five days, the most of any sector in that period.

An investor paid about $5.3 million for a trade that will pay off if the iShares Russell 2000 ETF falls at least 2 percent by May.

The trader bought 40,000 bearish contracts Thursday on the small-cap stock ETF expiring in May with a strike price of $113, while selling the same number of May $107 puts in a strategy known as a put spread, according to JonesTrading Institutional Services. The trade cost $1.33 to put on for each contract.

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