U.S. equities and stock exchange traded funds slide Tuesday as plunging tech stocks more than offset a rebound in energy and financials.
The S&P 500 Index, along with related funds including the SPDR S&P 500 ETF (NYSEArca: SPY), iShares Core S&P 500 ETF (NYSEArca: IVV) and Vanguard 500 Index (NYSEArca: VOO), were 0.5% lower Tuesday.
Dragging on the equities market, technology company shares in the S&P 500 declined 1.2% Tuesday. Utility companies in the S&P 500 were also among the worst hit areas of the market, falling off 1.3%.
The growth-oriented tech sector has been among the best performing areas of the market this year, which has led some to question the sector’s lofty valuations.
“Tech has gotten a bit ahead of itself. We’ve seen the sector bounce back but I don’t think you see the confidence that was there in tech prior to a couple of weeks ago,” Brad McMillan, chief investment officer for Commonwealth Financial, told Reuters.
Meanwhile, energy and financial companies in the S&P 500 were 0.2% and 0.9% higher, respectively, on Tuesday.
The energy sector is regaining ground as West Texas Intermediate crude oil futures headed toward $45 per barrel while financials, notably bank stocks, rallied on rising 10-year Treasury note yields – higher rates tend to benefit banks since they bolster the net-interest margins
Related: Oil ETFs: Worse, Not Better, as OPEC Cuts Back
While the markets have recently been stuck in a rut, some observers argue that the economy is still expanding with consumers leading the charge. Recent data revealed consumer confidence for June rose more-than-expected, which could add to the Federal Reserve’s case for another rate hike this year.
“The consumer remains confident and given that consumers drive two-thirds of the economy, that to me says, perhaps the news of a slowdown may be oversold,” Brad McMillan, Chief Investment Officer for Commonwealth Financial, told Reuters. “I think at this point the Fed is more or less committed to raising rates as they’re more worried about being behind the curve and reloading the gun in case of a recession.”
Philadelphia Fed President Patrick Harker hinted the Fed could raise rates at least once more this year, arguing the recent weakness in inflation is likely temporary.
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