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Midday Market Update: Tech Drags Market Down

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The market is signaling some level of comfort in the ongoing economic recovery, but the major U.S. stock indices are falling, as big tech stocks drag the market down.

The S&P 500 fell 0.8%, dragged lower by large cap growth tech socks, as the Nasdaq 100 fell 1.35%. Investors have been re-rating growth tech valuations, as at-home and growth services like e-commerce and cloud may have seen massive amounts of pulled forward demand from later years. The Nasdaq 100 is down more than 11% since Sept. 2. Investors had piled into those stocks when prospects for a V-shaped economic recovery looked shakier.

The 10-Year treasury yield rose to 0.68%. Yields rise when prices fall. The price of crude oil initially rose a few tenths of a percentage points to just under $40 a barrel, before teetering between up and down around midday Wednesday.

Some economically-sensitive stocks mostly rose, with large cap consumer discretionary up about a half of a percentage point, following an enormous beat of revenue expectations from Nike  (NKE) - Get NIKE, Inc. Class B Report. Nike’s revenue of more than $10 billion was almost flat year-over-year, against estimates of a drop of more than 10%. The stock rose 9%, as earnings per share almost doubled analysts estimates.

But it was Nike’s digital efforts that drove the stock, while foot traffic was weak. Digital sales rose 82%. Digitally-focused consumer brands performed exceptionally well Wednesday, with Lululemon  (LULU) - Get Lululemon Athletica Inc Report up 2.7%. Chipotle  (CMG) - Get Chipotle Mexican Grill, Inc. Report rose 3%. Starbucks  (SBUX) - Get Starbucks Corporation Report rose 0.5%. Meanwhile, some restaurant and airline stocks fell a bit, while others rose.

Bank stocks rose slightly, before falling slightly, while manufacturing stocks were mixed and closer to down in aggregate.

Manufacturing and service purchasing managers index’s showed September readings of above 53 (above 50 represents growth year-over-year). This is a positive read on the economy as it recovers.

Still, fiscal stimulus is still needed to boost small businesses and jolt employment and consumer spend, a dynamic on investors’ minds, likely holding back further gains in cyclical stocks.

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