Tech Shares Fall as Trade War Fears Rattle Markets
June 25 2018 - 12:55PM
Dow Jones News
By Akane Otani, Michael Wursthorn and Allison Prang
U.S. stocks tumbled Monday, heading for their biggest one-day
slide in months, as fresh escalations in the global trade conflict
sent investors fleeing from some of the market's most-beloved
technology firms.
Fresh jabs between the White House and China exacerbated
investor fears about a full-blown trade war. President Donald Trump
is moving to bar Chinese companies from investing in U.S. tech
firms and block additional tech exports to the country, in his
latest effort to pressure Beijing. Chinese President Xi Jinping
told a group of multinational chief executives that Beijing would
"punch back."
The blue-chip index fell as much as 446 points as investors
worried that the war of words between Washington and Beijing has
the potential to spiral further, crimping corporate profits and
disrupt economic growth around the world.
The Dow was recently down 365 points, or 1.5%, at 24216. The
S&P 500 dropped 1.5%, and the tech-heavy Nasdaq Composite fell
2.4%.
Monday's selling entangled a sector of the stock market that had
been relatively resilient to the rise in trade tensions over recent
months. Technology stocks have been a standout in the S&P 500
this year, rising 9.5% compared with the S&P 500's 1.5% gain.
Companies like Twitter, Nvidia and consumer-discretionary firm
Amazon.com have surged more than 40% apiece as investors funneled
money into firms upending everything from communication to
brick-and-mortar retail.
Some analysts said the technology sector's resilience in the
face of steep declines in industrial conglomerates and agricultural
firms reflected bets among investors that technology firms would be
among the least exposed to tariffs that China and the European
Union have imposed on the U.S.
Yet the selling Monday, which put the Nasdaq on course for its
biggest one-day percentage decline since March, laid bare the
vulnerability of those assumptions: showing investors that even
firms that have posted remarkable earnings growth this year are
susceptible to ruptures in global trade.
Technology companies in the S&P 500 pull in about 59% of
their revenues from overseas, giving them the highest foreign
exposure of the broad index's 11 sectors, according to FactSet and
BofA Merrill Lynch data.
Investors around the globe have been spooked by the prospect of
a full-blown trade war between the U.S. and China. While the
tariffs so far announced by the U.S. administration -- and China's
retaliatory measures -- amount only to a small number of goods,
analysts fear that tensions could escalate and spread across other
major economies.
Joseph Amato, chief investment officer at Neuberger Berman, said
that trade has been the main focus for investors, but most
portfolio managers at his firm don't see it becoming a big
disruption to the world economy.
The market also isn't concerned about tariffs that affect a
small portion of goods, he said, noting there are "many other ways
that the Chinese could impact the U.S. economy."
"That's what the market's worried about," he said.
Stock losses were global, with the Stoxx Europe 600 falling 2%
and Hong Kong's Hang Seng down 1.3%.
In Europe and emerging markets such as China, recent economic
data has pointed to weaker growth than earlier in 2018, further
damping investor sentiment. On Monday, the monthly Ifo Business
Climate Index suggested German business sentiment deteriorated
further in June.
"We've moved away from the synchronous global expansion," said
Bob Baur, chief global economist at Principal Global Investors, who
believes global growth peaked around February of this year, but
that "the U.S. is still gaining momentum."
Write to Akane Otani at akane.otani@wsj.com and Michael
Wursthorn at michael.wursthron@wsj.com and Allison Prang at
allison.prang@wsj.com
(END) Dow Jones Newswires
June 25, 2018 13:40 ET (17:40 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.