Tech retreat continues, Twitter drops nearly 18% to record low

U.S. stocks were broadly lower on Tuesday, led by a continued retreat in tech and social media stocks.

NASDAQ took the brunt of the selling, falling 1.4%, while the Russell 2000 lost 1.6%. But blue chips were also weaker, with the Dow losing 0.8%, with 27 of its 30 components falling, and the S&P 500 down 0.9%, with nine of its 10 sectors declining, with financials, consumer discretionary and tech stocks all down more than 1%. Energy was the only sector to buck the downtrend, gaining a modest 0.1%.

The drubbing in tech stocks was led by a full-scale retreat in the shares of Twitter, which plunged nearly 18% to an all-time low of $31.85. The stock is now worth less than $6 above its original IPO price of $26 and down more than 50% in the last three months. The stock was easily the most heavily traded issue, with more than 134 million shares trading Tuesday out of 570 million outstanding. Nearly 500 million additional shares held by company insiders are poised to hit the market as a lock-up period expires. But TWTR was hardly the only big-name tech or social media stock to suffer on Tuesday, with Netflix losing more than 5% and Facebook, Tesla and Amazon all down by more than 3%. The NASDAQ internet index dropped 2.7% while the biotech index fell 1.7% and the computer barometer lost 1.3%.

European stocks were also mostly lower, while the euro hit a two-month high and yields on Italian 10-year sovereign bonds dropped below 3% for the first time in more than 20 years. In stocks, most of the major national indexes were lower, except Spain’s, which recorded a minor increase. The broad-based Stoxx Europe 600 fell 0.3%. In the bond market, Italian and Spanish bonds continued their nearly two-year-old rally. The yield on the 10-year Italian bond closed down four basis points to an even 3% after hitting 2.99% during the session, the lowest rate since at least 1993, when Bloomberg began compiling such data. Yields on comparable Spanish bonds also fell another four bps to 2.95%, their lowest level ever; Spanish bonds cracked the 3% mark late last week. The euro, meanwhile, rose 0.4%, reaching its highest level in nearly two months, remaining above $1.39 to the dollar. The last time the euro hit $1.40 was October 2011. The currency is up 3.2% against the dollar since the end of January. In Asia, India’s Sensex rose 0.3% while the Shanghai composite recorded a fractional gain. Japanese and Hong Kong markets were closed for holidays.

The U.S. trade deficit narrowed slightly in March, as both exports and imports rose, while February’s deficit was revised downward a bit. The trade imbalance in March was a negative $40.4 billion, in line with Street forecasts, as exports rose 2.1% after falling 1.3% in February, and imports climbed 1.1% versus no change the prior month. Compared to a year earlier, exports are up 5% and imports are up 5.9%. February’s trade deficit was revised downward to minus $41.9 billion from the minus $42.3 billion originally reported.

Reports/dates/facts/links worth paying attention to over the next week:

  1. May 7: U.S. productivity and unit labor costs for Q1 2014; MBA home purchase applications and mortgage refis (latest week); U.S. consumer credit for March; Federal Reserve Chair Janet Yellen to testify before the Joint Economic Committee in Washington.
  2. May 8: Same-store sales for U.S. chains (April); German industrial production (March); Fed Chair Yellen continues her congressional testimony before the Senate Budget Committee; weekly unemployment claims.
  3. May 9: JOLTS job openings survey for March.

Copyright © 2014 by Wright Investors’ Service, Inc. The views expressed in this blog reflect those of Wright Investors’ Service, Inc. and are subject to change. Statements and opinions therein are based on sources of information believed to be accurate and reliable, but Wright Investors’ Service, Inc. makes no representations or guarantees as to the accuracy or completeness thereof. These views should not be relied upon as investment advice.

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