The weakness in the technology sector has been an ongoing theme, weighing on broad U.S. equities and stock exchange traded funds, on increased anxiety over lofty valuations as markets hover near record highs.
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 0.3% lower Thursday.
Dragging on the broader markets, technology company shares in the S&P 500 were 0.6% lower and tested their short-term, 50-day simple moving average on Thursday. Nevertheless, the S&P 500 tech sector has gained 16.7% so far this year, far outperforming other sectors.
The tech sector, though, soured recently after a drop in Apple (NasdaqGS: AAPL) shares triggered a mass sell-off and led to the segment’s largest two-day decline in almost a year.
“The huge tech run was impressive and has come to a point where people want to take some money off the table and preserve profits,” Andre Bakhos, managing director at Janlyn capital, told Reuters.
Investors are also wary about the economy’s ability to withstand a possible third rate hike later this year, along with the Federal Reserve’s plans to reduce its balance sheet.
“The U.S. economy looks quite dull at the moment,” Neil Dwane, global strategist at Allianz Global Investors, told the Wall Street Journal. “Despite falling unemployment, inflation is still low and the economy is struggling to grow in the uninspiring 1-2% range.”
Moreover, speculation that President Donald Trump is being investigated for possible obstruction of justice charges fueled market anxiety and damped the outlook on the current administration’s ability to push through its pro-growth agenda, which fueled the recent bull market rally.
Looking ahead, traders will be watching out for the Bank of Japan’s end to a two-day meeting on Friday, which may provide clues on policy maker’s outlook for inflation and growth.
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