By Anora Mahmudova and Victor Reklaitis, MarketWatch
NEW YORK (MarketWatch) -- U.S. stocks sold off on Tuesday with
so-called high-growth momentum plays hit hardest, while the Dow
Jones Industrial Average and S&P 500 retreated further from
recent peaks.
Biotechnology, Internet and small-cap companies saw their shares
drop sharply for the second day, dragging the rest of the market
with them.
The Dow Jones Industrial Average(DJI) dropped 91 points, or
0.5%, to 16,934.83, while the S&P 500(SPX) shed 10 points, or
0.5%, to 1,967.26. The Nasdaq Composite(RIXF) lost 51.46 points, or
1.1%, to 4,400.33. The iShares Nasdaq Biotechnology ETF (IBB) fell
2%, while Global X Social Media Index ETF (SOCL) fell 3.4%..
Rob Stein, CEO of Astor Investment Management, said that
Tuesday's pullback is mostly due to technicals rather than
fundamentals.
"When markets reach new peaks, investors tend to take
opportunity and lighten up and rebalance. We think the economy is
in its mid cycle and has more room to grow. In this environment our
risk-reward model is still favoring stocks with decent expected
returns for the next several quarters," Stein said.
Earnings season will get its unofficial kickoff after the
market's close, as Alcoa Inc. releases its second-quarter results.
Tuesday is expected to be light on top-tier economic releases,
although job openings data and two Federal Reserve speakers are on
tap.
Before Tuesday's open, a small-business optimism index showed a
June dip amid a big fall in those who expect the economy to
improve. Job openings at U.S. workplaces rose to 4.64 million in
May -- the most since June 2007 -- from 4.46 million in April, the
U.S. Department of Labor reported Tuesday. (Read more: Two of
Yellen's favorite jobs indicators are coming Tuesday
http://blogs.marketwatch.com/capitolreport/2014/07/07/two-of-yellens-favorite-jobs-indicators-are-coming-tuesday/?link=instory.)
Richmond Federal Reserve President Jeffrey Lacker said the Fed
must be pre-emptive, hiking rates before inflation emerges. Eastern
and Minneapolis Fed President Narayana Kocherlakota is scheduled to
speak at 1:45 p.m.
After the close, Alcoa (AA) is forecast to report per-share
earnings of 12 cents on revenue of $5.61 billion for the second
quarter. Shares were down 1%. Check out: What to watch for in Alcoa
earnings.
Among individual stocks, Groupon Inc.(GRPN) initially jumped
after B. Riley upgraded the daily-deals site to buy, but reversed
gains and traded 2% lower. Delta Air Lines Inc.(DAL) was lower
again, sliding 3.2%, after dropping sharply in two of the past
three sessions. (Read more in the Movers & Shakers column
http://www.marketwatch.com/story/alcoa-allergan-and-petsmart-are-stocks-to-watch-2014-07-07.)
In other markets, the Nikkei 225 index closed down 0.4%, though
the rest of Asia largely held steady. The Stoxx Europe 600 pulled
back after weak German trade data supported the view that economic
activity in the country is slowing.
Gold prices (GCQ4) pushed lower, while crude oil also slipped.
The British pound (GBPUSD)slipped on unexpectedly weak U.K. factory
data.
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