Wall Street closes in red as tech stocks extend losses
|- Information Technology Index drops 1.8% on Monday.
- Nasdaq Composite loses more than 1% for the third day in a row.
- Telecom extends rally to offset some of the losses.
Major equity indexes in the United States started the day on a weak note and extended their losses as tech-giants continued to suffer sharp losses on last week's disappointing earnings results.
Netflix erased nearly 5% to lead the losses in the FAANG (Facebook, Amazon, Apple, Netflix, Google) group. "There's a lot of money and speculation piled into the FAANG stocks and now that money is coming out. It's money coming out of a crowded trade, and people are concerned about the midterm election news cycle and about tariffs to some degree," Wayne Kaufman, chief market analyst at Phoenix Financial Services in New York.
The S&P 500 Information Technology Index dropped 1.8% on the day to become to worst performing sector of the day. On the other hand, the telecom sector continued to grab the investors' attention as a better investment alternative and the S&P 500 Telecom Services Index added nearly 2%.
In the meantime, the barrel of West Texas Intermediate rose above the $70 handle on Monday and helped the S&P 500 Energy Index gain traction on its way to a 0.85% daily gain.
The Nasdaq Composite lost 107.71 points, or 1.4%, to record its third straight daily drop of over 1%. The Dow Jones Industrial Average dropped 144.23 points, or 0.57%, to 25,306.83, and the S&P 500 erased 16.21 points, or 0.58%, to 2,802.61.
DJIA Technical Outlook (via FXStreet Chief Analyst Valeria Bednarik)
"The Dow fell for a second consecutive session, but the movement so far seems corrective, as the index held above the 25,000 threshold, and more relevant, above the 23.6% retracement of its July rally, this last at 25,225. The daily chart shows that the index keeps developing above all of its moving averages, with the 20 DMA maintaining a strong bullish slope above the largest and below the mentioned Fibonacci support, while technical indicators keep retreating from overbought readings, the RSI currently at 61 and the Momentum approaching its mid-line."
"Shorter term, and according to the 4 hours chart, the index has turned bearish, breaking below its 20 SMA, and with technical indicators heading steadily lower within negative levels."
According to the analyst, supports align at 25,288, 25,224, and 25,163 while resistances could be seen at 25,368, 25,400, and 25,449.
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