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While you were sleeping: Tech stocks slide

Thursday 30th November 2017

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Wall Street was mixed amid a broad-based decline in technology stocks including Apple, Amazon and Netflix.

In prepared remarks for testimony before the congressional Joint Economic Committee in Washington, Federal Reserve Chair Janet Yellen said US growth is “increasingly broad based,” underpinning optimism about the economic outlook.  

“The economic expansion is increasingly broad based across sectors as well as across much of the global economy,” Yellen noted. “I expect that, with gradual adjustments in the stance of monetary policy, the economy will continue to expand and the job market will strengthen somewhat further, supporting faster growth in wages and incomes.”

Indeed, a Commerce Department report showed US gross domestic product grew at a 3.3 percent annual pace in the third quarter, up from a previous estimate of 3.0 percent and better than economists had predicted.

US Treasuries declined, as did the greenback. 

In 1.03pm trading in New York, the Dow Jones Industrial Average added 0.3 percent. However, the Nasdaq Composite Index dropped 1.3 percent. In 12.48pm trading, the Standard & Poor’s 500 Index inched 0.03 percent lower.

Investors are repositioning in anticipation of the Trump administration’s tax reform.

“The large tech companies already have low effective tax rates because they were gaming the system,” Michael O’Rourke, chief market strategist at JonesTrading Institutional Services, told Bloomberg. “Any reform would have to close the loopholes, which obviously they’re trying to do, so they don’t benefit.”

Earlier in the day, both the Dow and the S&P 500 touched record highs. 

“What we’re seeing is a combination of defence positioning, with people taking some profit out of the high-growth areas, technology specifically, and rotating into sectors that should hold up better if we get any negative news on tax bill or the debt ceiling,” Jonathan Mackay, investment strategist at Schroders, told Reuters.

With financial stocks, investors may be adjusting expectations to catch up with the Fed on interest rate hikes, Mackay noted.

The Dow gained as advances in shares of UnitedHealth Group and those of Verizon, recently up 3.4 percent and 2.9 percent respectively, outweighed slides in shares of Visa and those of Apple, recently down 4.2 percent and 2.8 percent respectively. 

Shares of Chipotle Mexican Grill climbed, up 3.6 percent as of 12.04pm in New York, after the burrito chain said founder Steve Ells will step down from his role as chief executive officer following a series of food safety problems. 

Ells will become executive chairman following the completion of a search to identify a new CEO, the company said in a statement, saying it is looking for “a new leader with demonstrated turnaround expertise to help address the challenges facing the company, improve execution, build customer trust, and drive sales.”

"This news is unexpected given the recent moves to streamline the CEO position, but is an absolutely critical, important next chapter for Chipotle, which has been struggling to recover sales under Ells," Mizuho Securities USA analyst Jeremy Scott wrote in a note, Reuters repored. "We believe the move today will help to restore confidence in the board, the activist, and in the stock."

“Bringing in a new CEO is the right thing to do for all our stakeholders," Ells said in the statement. "It will allow me to focus on my strengths, which include bringing innovation to the way we source and prepare our food. As we work hard to restore our brand, I believe we can capitalise on opportunities.”

In Europe, the Stoxx 600 Index ended the session with a 0.3 percent increase from the previous close. Germany’s DAX Index eked out a 0.02 percent gain, while France’s CAC 40 Index rose 0.1 percent. 

The UK’s FTSE 100 Index slid 0.9 percent.


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