By Dan Strumpf
U.S. stocks fell on Thursday, reversing much of April's gains,
as mixed economic data fueled a selloff in technology and
small-company shares that until recently had been strong
performers.
The Dow Jones Industrial Average fell 195.01 points, or 1.1%, to
17840.52. The S&P 500 index dropped 21.34 points, or 1%, to
2085.51. The Nasdaq Composite Index shed 82.22 points, or 1.6%, to
4941.42.
Thursday's slide wiped out the bulk of the month's gains for
stocks. Until this week, April had been a strong month for major
benchmarks, with both the S&P 500 and the Nasdaq Composite
notching all-time highs last week.
But a reversal in some of the best-performing corners of the
market--from small-company shares to biotechnology stocks to
European shares--spilled over into the broader market in recent
sessions. The Dow Jones Industrial Average eked out a 0.4% gain in
April, while the S&P 500 rose 0.85%.
Pockets of the market hit the hardest on Thursday were
especially popular among hedge funds and other fast-moving
traders.
"The market [is] punishing all the crowded trades at once," said
Michael Antonelli, an equity sales trader at Robert W. Baird in
Milwaukee.
On Thursday, the Nasdaq Biotechnology Index fell 3.1%, and is
down 8.1% this week. Before its recent pullback, the
index--comprised of many highflying biotechnology stocks--had
gained as much as 21% for the year.
The Russell 2000 index lost 2.2%. The small-cap benchmark had
gained 5.5% for the year through last week's high point.
Stocks kicked off the session lower following a flurry of data
that underscored a recent downshift in the U.S. economy. While
weekly jobless claims fell to the lowest level in 15 years, a
report on consumer spending showed a smaller-than-expected pickup
in March, while inflation undershot the Federal Reserve's 2% target
for the 35th month in a row. The data came one day after the
Commerce Department reported the U.S. economy grew just 0.2% during
the first three months of the year, well below expectations.
"People are still kind of smarting from the GDP number," said
Ted Weisberg, a trader at Seaport Securities. "You can wrap any
excuse around bad economic numbers, but at the end of the day
they're just excuses."
Technology stocks fell sharply Thursday, as Apple Inc. sank
2.7%. The pullback came after The Wall Street Journal reported that
a key component of the Apple Watch made by one of two suppliers was
found to be defective. The broader S&P 500 Information
Technology index lost 1.6%.
European stocks rebounded from Wednesday's steep losses.
Germany's DAX added 0.2%, while France's CAC 40 gained 0.1%.
For months, investors have been calling for a pickup in
spending, as consumers benefit from lower oil prices. While oil
prices have rebounded in recent weeks, they still remain down 44%
from last June. Increased spending could boost corporate revenues,
and in turn, profits.
"What's been interesting is the buildup in the savings rate over
the last couple of months and the fact that consumers have not yet
begun to spend that supposed windfall from gasoline prices coming
down," said Ben Pace, chief investment officer of HPM Partners,
which manages $6 billion. He said he continued to favor consumer
discretionary stocks as he expects spending to eventually increase,
also driven by improvement in the labor market.
Shares of LinkedIn Corp. plunged 20% in after-hours trading
after the company reported a first-quarter loss and said it expects
second-quarter profit to come in below Wall Street
expectations.
Shares of Viacom Inc. fell 3.9% after the media company said it
swung to a loss in its March quarter and took a hefty charge to
restructure its business.
Time Warner Cable Inc. posted disappointing profit and revenue
for the first quarter. Shares fell 1.5%.
Crude-oil futures on Thursday rose 1.8% to $59.63 a barrel,
their highest settlement since Dec.11. Gold futures fell 2.3% to
$1182.40 an ounce.
The yield on the 10-year Treasury note rose to 2.096% from
2.035% on Wednesday. Yields rise as prices fall.
Saumya Vaishampayan contributed to this article.
Write to Dan Strumpf at daniel.strumpf@wsj.com
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