Wall Street drops as tech stocks struggle for direction

(Reuters) – The S&P 500 fell in volatile trading on Thursday as heavyweight tech-related stocks slipped after a sharp rebound in the previous session, while elevated jobless claims underscored a patchy economic rebound.

Stay-at-home winners Apple Inc, Microsoft Corp and Netflix Inc fell between 1% and 1.6%. Amazon.com rose 0.2% and Tesla Inc jumped 4.5%, helping limit the Nasdaq’s losses.

The NYSE FANG+TM Index, which includes the core FAANG stocks, was up 0.9%.

“It’s going to be a battle for the next couple of days from investors who are trying to pick spots to get back into technology and traders who are using some of these sharp rallies to take profit,” said Rick Meckler, partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey.

Wall Street’s main indexes bounced on Wednesday from their biggest three-day rout since March, as investors returned to tech-focused stocks that are deemed insulated from the current economic downturn.

The S&P tech index fell 0.7%. Despite the recent pullback, the tech index is up about 44% in 2020, far outperforming the benchmark S&P 500’s 13.5% rise in the same period.

Many market participants are viewing the selloff as a bout of turbulence rather than the start of a longer slide.

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“If (the stock market) today closes up, even if they’re small gains, that’s going to give more confidence back to Wall Street participants to feel more comfortable to get back in,” said Robert Pavlik, chief investment strategist at SlateStone Wealth LLC in New York.

The CBOE volatility index edged up on Thursday. The index hit a near three-month high at the start of a historically tumultuous September. Investors have also remained cautious as data paints a mixed picture of U.S. economic health.

The number of Americans filing new claims for unemployment benefits hovered at high levels last week, according to the Labor Department’s data, as layoffs and furloughs persisted across industries.

A separate report showed U.S. producer prices rose slightly more than expected in August as the cost of services increased solidly.

U.S. House Speaker Nancy Pelosi said she was hopeful legislation for additional COVID-19 relief could be finalized before the Nov. 3 presidential election no matter how the Republican-led Senate voted on a slimmed down version later on Thursday.

At 12:49 p.m. ET, the Dow Jones Industrial Average was down 188.82 points, or 0.68%, at 27,751.65, the S&P 500 was down 22.01 points, or 0.65%, at 3,376.95. The Nasdaq Composite was down 38.34 points, or 0.34%, at 11,103.22.

Energy stocks dropped 2.4 as oil prices extended losses after U.S. data showed a surprise build in crude stockpiles last week and on forecasts for lower global oil demand.

Declining issues outnumbered advancers for a 1.32-to-1 ratio on the NYSE and for a 1.12-to-1 ratio on the Nasdaq.

The S&P index recorded six new 52-week highs and one new low, while the Nasdaq recorded 38 new highs and 19 new lows.

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