ASX set to fall as tech giants weigh down Wall Street Loading 3rd party ad content Loading 3rd party ad content Loading 3rd party ad content Loading 3rd party ad content

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By Damian Troise and Alex Veiga

Stocks were solidly lower in afternoon trading on Tuesday (US time), dragged down by big technology companies like Apple and Google.

Most sectors in the benchmark S&P 500 index fell as investors continue to focus on corporate earnings and gauge the economic recovery’s progress. Earnings and most economic indicators have been signalling a steady recovery, but investors remain concerned about the lingering threat from COVID-19, inflation and other factors that could crimp progress.

Tech giants like Apple and Facebook stumbled on Tuesday.

Tech giants like Apple and Facebook stumbled on Tuesday. Credit:AP

A key concern has been the recovery in the employment market. Investors will get another update with this week’s jobs report.

“The entire market is down, but the tech stuff is down way more,” said Ross Mayfield, investment strategist at Baird. “If you look at the broad picture, the earnings beats are strong and we’re expecting a big job print on Friday.”

In late trade, the S&P 500 index was down 0.9 per cent, the Dow Jones is 0.2 per cent lower and the technology-heavy Nasdaq Composite dropped 2.2 per cent. It sets up the Australian sharemarket for losses, with futures at 5.22am AEST pointing to a dip of 29 points, or 0.4 per cent, at the open.

Big technology shares were dragging down the entire market. Apple fell 4 per cent, Facebook shares were down 2.4 per cent, Google’s parent company dropped 2.5 per cent and Amazon fell 2.9 per cent. The declines added to the drop in tech shares that happened late on Monday, which caused the Nasdaq to end in the red.

Bond yields fell. The yield on the 10-year US Treasury note dropped to 1.58 per cent from 1.60 per cent the day before.

Treasury Secretary Janet Yellen ruffled financial markets Tuesday with a comment economists regarded as self evident - that interest rates will likely rise as government spending ramps up and the economy responds with faster growth.

“It may be that interest rates will have to rise somewhat to make sure our economy doesn’t overheat,” Yellen said in an interview with the Atlantic recorded Monday that was broadcast on the web on Tuesday. “It could cause some very modest increases in interest rates.”

Saudi Aramco said on Tuesday its profits soared by 30 per cent in the first-quarter of the year, compared to last year, riding the back of higher crude oil prices and recovering demand as major economies claw their way out of recession, easing restrictions amid coronavirus vaccine rollouts.

Until this week, stocks have been grinding higher on expectations of an economic recovery and strong company profits this year as large-scale coronavirus vaccination programs help people return to jobs and normal activities after more than a year of restrictions. Massive support from the US government and the Federal Reserve, and increasingly positive economic data, have also helped put investors in a buying mood, keeping stock indexes near their all-time highs.

More than half of the companies in the S&P 500 have reported their results so far this earnings season, which show profit growth of 54 per cent, according to FactSet.

On Monday, Federal Reserve Chairman Jerome Powell said the economic outlook has “clearly brightened” in the United States, but the recovery remains too uneven.

Investors will get a closely watched jobs report on Friday. Economists expect that US employers hired 975,000 workers last month as the economy accelerated out of the pandemic and vaccines rolled out nationwide. The unemployment rate is expected to drop to 5.8 per cent from 6 per cent.

AP, Bloomberg

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