Tech Shares Weigh on Major Indexes

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Technology stocks tumbled Monday, weighing on major indexes, after the S&P 500 and Dow Jones Industrial Average ended last week at fresh records.

Stocks have ground higher in recent days after Federal Reserve officials reiterated their commitment to easy financing conditions to aid the economic recovery. President Biden is also proposing additional fiscal spending. A weaker-than-expected jobs report on Friday boosted optimism that the government and central bank are likely to continue with supportive policies. But some money managers are concerned that stocks’ high valuations may mean the rally will lose steam.

“Markets have come quite a long way and gone up a lot in a relativity straight line,” said Mike Bell, global market strategist at J.P. Morgan Asset Management. “So the hurdle for further gains becomes higher.”

The S&P 500 ticked down 0.5%, after closing Friday at its 26th all-time high for this year. The Dow rose 0.4% and briefly crossed the 35000 milestone for the first time in intraday trading, while the Nasdaq Composite fell 2.1%.

Tech stocks drove much of last year’s market rally, a trend that has reversed in 2021 as investors have piled into shares of value stocks in the financial and energy sectors that tend to fare better during an economic recovery.

“I’d say this is a fairly resilient market for the most place, again with the exception of growth end of the spectrum, which is telling,” said Jennifer Ellison, principal at Bingham Osborn & Scarborough. “We tend to get a shift in a trend when we have a recession and then a new cycle starting. So not surprising at all to see what was leading the markets in the last cycle now lagging in this one.”

Shares of semiconductor companies like Lam Research and Qorvo were among Monday’s decliners, falling roughly 5.9% and 6.4%, respectively.

Micron Technology

fell nearly 5%, and

Align Technology

lost 5.8%.

“They are seen as bellwether names for global growth,” Quincy Krosby, chief market strategist at Prudential Financial, said of semiconductor companies. “In other words, if you look at all the areas they’re in—5G, cybersecurity, cloud, gaming—it’s so broad. I think this is again consolidation, pulling back, allowing the market to just consolidate.”

Investors may be hesitant to put more money into technology shares, which have become expensive, said

Sebastien Galy,

senior macro strategist at Nordea Asset Management. Money managers are increasingly betting on sectors such as banking, travel and leisure that would benefit when the economy rebounds and more businesses reopen.

Climbing commodity prices, supply chain issues and chip shortages are adding to producing costs, which are likely to feed through to individual consumers and corporate profits, said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

“From a market perspective, because everyone knows that inflation is going higher, the real question is whether the rise in inflation is going to be durable or not,” Ms. Ozkardeskaya said. “Inflation is a headwind for growth stocks. Value is going to be more capable of carrying the weight of inflation on their shoulders.”

Concerns that higher inflation may erode the value of future earnings is likely to be driving investors away from technology stocks as well, traders said.

Prices of gasoline could continue to rise following the shutdown of Colonial Pipeline’s 5,500-mile pipeline from the Gulf Coast to Linden, N.J. According to the AAA, gasoline prices could rise 3 cents to 7 cents a gallon this week in states most affected by the shutdown.

“The immediate concern is: ‘Are we going to have supply coming up to the Northeast?’” Ms. Krosby said. “There’s also a broader concern—and you’ll see it in the market, too—and that is, ‘Who is responsible for this? Is this a couple hackers working in an apartment somewhere in the world, or is this the work of a state actor testing the U.S. and making it clear to everyone we do have issues in terms of cybersecurity?’”

In other corporate news,

Marriott International

shares fell 2.9% after the hotel chain said it swung to a loss for the first quarter.

In bond markets, the yield on the 10-year Treasury ticked down to 1.575%, from 1.576% Friday.

Overseas, the pan-continental Stoxx Europe 600 edged up 0.1%.

The British pound rose 1.4% against the dollar. The Scottish National Party fell one seat short of an outright majority in the country’s parliament, prompting optimism that Scotland may avoid holding another vote on splitting away from the U.K.

In Asia, South Korea’s Kospi advanced 1.6%, and the Shanghai Composite Index added 0.3%. Japan’s Nikkei 225 rose by almost 0.6%. Australia’s S&P/ASX 200 closed 1.3% higher as mining stocks pulled the index to its first record since the onset of the Covid-19 pandemic.

Traders worked on the New York Stock Exchange on Friday.



Photo:

Nicole Pereira/Associated Press

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Julia Carpenter at Julia.Carpenter@wsj.com

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