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Wall Street rally fizzles as tech stocks drag

Stock MarketsJun 27, 2018 01:52PM ET
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© Reuters. Traders work on the floor of the NYSE in New York City

By Sruthi Shankar

(Reuters) - A mini rally in U.S. stocks, sparked by a U.S. move to ease its stance on curbing Chinese investments in American technologies, ran out of steam in afternoon trading on Wednesday, but a jump in oil prices helped prop markets.

President Donald Trump said he will use a strengthened national security review panel — the Committee on Foreign Investment in the United States (CFIUS) — to deal with potential threats from Chinese acquisition of U.S. technology, instead of imposing China-specific restrictions.

The decision marks a somewhat softer approach to curbing Chinese investments than reports on earlier plans to block firms with at least 25 percent Chinese ownership from buying U.S. tech firms.

"Nothing today came out other than commentary from the administration. The problems that we're dealing with in the market isn't going to be allayed by a couple of interviews," said Michael Antonelli, managing director, institutional sales trading at Robert W. Baird in Milwaukee.

"We're going to need significant commentary from the President, trade advisers about where this is all going."

After an initial rally, the S&P technology (SPLRCT) and industrial (SPLRCI) sectors — which have a relatively higher revenue exposure to China – fizzled. Tech stocks fell 0.63 percent, while industrials held a slim 0.15 percent gain.

The drop was relatively steeper in chipmakers, which on average get about a quarter of their revenue from China. The Philadelphia semiconductor index (SOX) slid 1.4 percent.

"I think it's still likely that chip stocks are a point of contention between the U.S. and China. So when they drop so low, they get interesting to investors and they come back to a place where fear kicks in again," said Kim Forrest, senior portfolio manager at Fort Pitt Capital Group in Pittsburgh.

At 13:39 ET the Dow Jones Industrial Average (DJI) was down 16.21 points, or 0.07 percent, at 24,266.90, the S&P 500 (SPX) was down 5.62 points, or 0.21 percent, at 2,717.44 and the Nasdaq Composite (IXIC) was down 54.88 points, or 0.73 percent, at 7,506.75.

The S&P energy index (SPNY) was up 1.6 percent, leading the gainers among the 11 major sectors, lifted by a jump in U.S. crude price as plunging stockpiles compounded supply concerns. [O/R]

Among stocks, General Electric (N:GE) gained about 3.2 percent, riding the optimism from the industrial conglomerates' restructuring plans announced on Tuesday.

Conagra (N:CAG) dropped 6.9 percent after the company said it would buy Pinnacle Foods (N:PF) for about $8.1 billion in cash and stock. Pinnacle Foods fell 4.1 percent after the widely anticipated deal announcement.

Declining issues outnumbered advancers for a 1.62-to-1 ratio on the NYSE and a 2.81-to-1 ratio on the Nasdaq.

The S&P index recorded 12 new 52-week highs and 11 new lows, while the Nasdaq recorded 49 new highs and 58 new lows.

Wall Street rally fizzles as tech stocks drag
 

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