S&P 500 Falls Most in 2 Months on Tech Selloff; Treasuries Rally

April 10, 2014

New York (Apr 10)    U.S. stocks fell, with the Standard & Poor’s 500 Index dropping the most since Feb. 3 to erase a two-day rally, as technology shares resumed a selloff. Treasury rates sank to a three-week low as concern eased about the timing of interest-rate increases. Gold added 1 percent.

The S&P 500 dropped 1.6 percent at 1:22 p.m. in New York, iping out a 1.5 percent gain in the past two days. The Nasdaq 100 Index sank 2.6 percent to the lowest since Feb. 6 on a closing basis after yesterday advancing the most in two months. The 10-year Treasury note lost five basis points to 2.64 percent. The Bloomberg Dollar Spot Index fell to a five-month low and the yen strengthened on a surprise drop in China’s trade figures. Gold jumped to $1,318.30 as metals rallied.

The Federal Reserve played down forecasts for rates to increase faster than projected earlier, with some members saying comments had been “misconstrued,” according to minutes of its March 18-19 meeting released yesterday. China’s exports slid 6.6 percent and imports declined in March, adding to concern that expansion in the world’s second-largest economy will deteriorate further. Greece ended a four-year exile from international markets with a bond sale of $4.2 billion, more than the government estimated.

“There’s still a continual rotation out of the high-flying momentum stocks of 2013 into more value-driven opportunities,” Chad Morganlander, a Florham Park, New Jersey-based portfolio manager for Stifel Nicolaus & Co., which oversees more than $150 billion. “This will continue in the coming weeks as investors look for consistency in earnings. You have concerns about high valuations and flat revenue growth, which is a perfect cocktail for a sector rotation out of growth and into value.”

Fed Minutes

The S&P 500 jumped 1.1 percent yesterday, the most since March 4, after several Fed policy makers said a rise in their median projection for the main interest rate exaggerated the likely speed of tightening, according to the minutes. The gauge had added 1.5 percent in the previous two days.

Investors returned today to selling the biggest winners in the five-year bull market, with Internet and biotechnology shares plunging. The Nasdaq 100 lost 2.5 percent today, nearly erasing two days of gains. EBay Inc. dropped 2 percent after reaching a deal with Carl Icahn to end his proxy fight by agreeing to add another independent director to the board.

“The market is very skittish,” David Pavan, a portfolio manager at ClariVest Asset Management LLC in San Diego, California, said in a phone interview. His firm oversees about $3.5 billion. “You see very sharp love and hate on a day-to-day basis. Today is a very strong preference for cheap stocks. Higher growth stocks get really hit hard.”

Phone stocks, which yield 5 percent as a group, the most among 10 S&P 500 industries, climbed 0.8 percent. AT&T Inc. advanced 1.3 percent.

Bed Bath & Beyond Inc. lost 6.4 percent today for the worst drop in the S&P 500. The retail chain’s first-quarter profit forecast fell short of analysts’ estimates. Rite Aid Corp. jumped 10 percent after forecasting full-year sales that exceeded estimates.

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