Big tech leads broader market lower on antitrust concerns
03-Jun-19 16:15 ET
Dow +4.74 at 24819.78, Nasdaq -120.13 at 7332.99, S&P -7.61 at 2744.45
briefing.com
[BRIEFING.COM] The S&P 500 lost 0.3% on Monday, as shares of big tech companies fell on various reports that heightened antitrust concerns. Lingering trade and growth concerns also helped curb risk sentiment and underpin the strength in U.S. Treasuries. A swarm of buyers in the last 30 minutes of action, however, helped the broader market close off its session lows.
The tech-sensitive Nasdaq Composite fell 1.6%. The blue-chip Dow Jones Industrial Average (+0.02%) finished fractionally higher, and the small-cap Russell 2000 increased 0.3%.
Facebook (FB 164.15, -13.32, -7.5%), Alphabet (GOOG 1036.23, -67.40, -6.1%), Amazon (AMZN 1692.69, -82.38, -4.6%), and Apple (AAPL 173.30, -1.77, -1.0%) were all singled out in various reports indicating that the companies could face antitrust scrutiny by the Department of Justice and/or Federal Trade Commission.
These companies represent some of the most widely-held stocks in the U.S., and their out-sized losses weighed heavily on the Nasdaq and on the S&P 500 communication services (-2.8%), information technology (-1.8%), and consumer discretionary (-1.2%) sectors. The other eight S&P 500 sectors finished higher, led by materials (+3.4%), to provide offsetting support.
Persisting concerns about trade and growth helped restrain buying conviction throughout the day. China blamed the U.S. for the setback in trade talks, which reinforced fears that a protracted trade war will squeeze global growth, and earnings, prospects. Global manufacturing PMI data, including in the U.S., revealed slower or flat growth in May.
On a related note, St. Louis Fed President James Bullard (FOMC Voter) said that slower economic growth could be sharper-than-expected due to the trade uncertainty. Mr. Bullard added that a rate cut may soon be warranted to boost inflation.
Growing expectations for a rate cut, and general growth concerns, helped send the 2-yr yield down 12 basis points to 1.83%. The 10-yr yield declined six basis points to 2.08%. The U.S. Dollar Index fell 0.5% to 97.22. WTI crude decreased 0.5% to $53.25/bbl, giving up an intraday rebound effort.
In other corporate news, German company Infineon announced plans to acquire Cypress Semiconductor (CY 22.07, +4.25, +23.9%) for approximately $10 billion, or $23.85 per share, in cash. The offer represents a 33.8% premium to CY's Friday closing price. Humana (HUM 250.32, +5.46, +2.2%) said it will not make a competing bid to acquire Centene (CNC 51.82, -5.93, -10.3%).
Reviewing Monday's economic data, which included the ISM Manufacturing Index for May and Construction Spending for April:
- The ISM Manufacturing Index for May checked in at 52.1% (Briefing.com consensus 52.6%), down from 52.8% in April. The May reading is the lowest since October 2016. The May reading is the lowest since October 2016.
- The key takeaway from the report is that it reflects a deceleration in national manufacturing activity that will contribute to the burgeoning growth concerns for the U.S. economy. According to the ISM, the past relationship between the PMI and the overall economy indicates the PMI for May corresponds to a 2.7% increase in real GDP on an annualized basis.
- Total construction spending was unchanged in April (Briefing.com consensus +0.4%) following an upwardly revised 0.1% increase (from -0.9%) in March.
- The key takeaway from the report is that it was better than the headline suggests, after accounting for the March revision, yet that still didn't change the fact that total construction spending is soft, evidenced by the 1.2% yr/yr decline that was driven by an 11.2% yr/yr decline in residential spending.
Looking ahead, investors will receive the Factory Orders report for April on Tuesday.
- Nasdaq Composite +10.5% YTD
- S&P 500 +9.5% YTD
- Russell 2000 +9.0% YTD
- Dow Jones Industrial Average +6.4% YTD
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