Midday Update: Stocks Falter as Big Tech Sells Off

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After a slightly more upbeat Friday morning, stocks were solidly in the red by midday, led by more selling in large cap growth tech stocks.

The S&P 500 fell 0.7%, pulled down by the tech components on the Nasdaq 100, down more than 1% by midday. It wasn’t a risk-on day outside of tech either, with the 10-Year Treasury yield down to 0.68% (yields fall when prices rise). Cyclical stocks were challenged.

FAANG stocks and large-cap software stocks were getting hammered, as investors continue to re-rate valuations of these high-growth companies, which may be experiencing a massive pull-forward of demand for their at-home services. 

Facebook  (FB) - Get Report shares held in with relative strength, posting a flat move. President Trump said Chinese-owned TikTok’s U.S. operations will be banned by Sunday if Oracle  (ORCL) - Get Report doesn’t complete its deal with the company. TikTok’s absence of the U.S. market wold be viewed as a positive for Facebook and Instagram’s user share in the country.

Value stocks were holding in better, but still down, with many cyclical sectors like consumer discretionary, oil and manufacturing down just a few tenths of a percentage point. Investors are awaiting more fiscal stimulus, which played a key role in the employment consumer spending rebound this year. 

Interest rates are near rock-bottom levels and many small businesses are still closed and in need of liquidity. To date, the economic rebound has been fierce, keeping some investors engaged in the stock market. "Fiscal disappointment would threaten floor of SPX 3300-3600 range, boost vol & defensives pre-election," wrote Strategists at Bank of America Global Research in a note, meaning insufficient fiscal stimulus could send cyclical stocks down and defensive ones like consumer staples up. 

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