US technology stocks slumped yesterday, resuming recent weakness in shares which had previously led US stocks higher for more than a year, while Greece’s much-heralded return to the bond market buoyed eurozone debt.
The yield on the benchmark 10-year US Treasury note fell to its lowest since the beginning of March as investors shifted out of equities into safe-haven government debt.
Technology and biotech shares led the way lower, as investors continue to question whether high-flying momentum stocks such as TripAdvisor are overvalued. The Nasdaq index, which is heavily composed of technology company shares, fell nearly three per cent.
European equity markets, which started the day stronger, fell in tandem with Wall Street.
The equity market dropped even after the Labour Department reported that US weekly jobless claims fell to a seven-year low, indicating ongoing recovery in the labour market and the economy.
Wall Street’s Dow Jones industrial average fell 178 points or 1.08 per cent, to 16,260.28, the S&P 500 lost 25.82 points or 1.37 per cent, to 1,846.46 and the Nasdaq Composite dropped 101.2 points or 2.4 per cent, to 4,083.20. The S&P technology sector fell 2.1 per cent, while the Nasdaq biotechnology index plunged 5.4 per cent.
Greece staged a triumphant return to the bond market just two years after its default placed it at the center of the eurozone debt crisis. Greece drew solid demand at its five-year bond sale, which aimed to raise three billion euros and offered a yield of 4.95 per cent, beating Athens’ five per cent target.
It had been expected to draw in US investors including hedge funds.
Greece’s deputy prime minister, Evangelos Venizelos, said the sale was at least eight times oversubscribed. Investors looked to the deal as further evidence that the eurozone’s economic recovery is gathering pace.
The global MSCI All-Country World index was down 0.7 per cent. The FTSEurofirst 300 index of leading European companies lost 0.5 per cent, shedding earlier gains.
European shares felt the sting of weak economic data, with Italy reporting softer-than-expected industrial output while a discounted share placement by Iberdrola triggered a selloff in Spanish utilities.
US Treasuries rallied on the weakness in stocks. The benchmark 10-year Treasury note rose 17/32 to drop its yield to 2.623 per cent, while the 30-year bond was little changed at 3.511 per cent.
Brent crude fell 55 cents to $107.43 a barrel, after gaining $2.16 over the previous two days.
Gold hit a two-and-a-half-week high as the dollar dropped. Spot gold hit its highest since March 24 at $1,324.40 an ounce before easing to $1320.20, a gain for the day of 0.55 per cent. (Reuters)