S&P 500, Nasdaq retreat as tech stocks lose favor

The S&P 500 and the Nasdaq fell on Tuesday as investors favored sectors that suffered most during the pandemic over those that benefited from virus lockdowns and social distancing due to optimism that a COVID-19 vaccine would help the economy rebound.

The heavyweight technology .SPLRCT, communication services .SPLRCL and consumer discretionary sectors .SPLRCD dropped sharply while investors moved to small cap stock indexes and sectors such as energy .SPNY, industrials .SPLRCI and consumer staples .SPLRCS.

Also chip stocks such as Nvidia NVDA.O were a drag on the technology sector as Apple Inc AAPL.O introduced its first notebook computer with an Apple-designed microprocessor.

“One of the reasons tech is down is the same reason everything else is up. It’s the reopening trade. To the extent the economy can reopen sooner rather than later the stay-at-home stocks won’t be as valuable,” said Jim Paulsen, chief investment strategist at The Leuthold Group in Minneapolis. Inc AMZN.O, Facebook Inc FB.O and Microsoft Corp MSFT.O, which have boomed during this year’s work-from-home trend and powered Wall Street to new highs, extended Monday’s losses, weighing on the tech-heavy Nasdaq.

Trading was choppy as some investors monitored for election uncertainty after U.S. Secretary of State Mike Pompeo became the latest Republican to suggest that President Donald Trump would not concede the White House to Democrat Joe Biden.

But Leuthold’s Paulsen said most market participants have been largely ignoring the Trump administration’s complaints about the election outcome because they have not produced any evidence of a problem with vote counts.

At 2:55 p.m. EST, the Dow Jones Industrial Average .DJI rose 243.9 points, or 0.84%, to 29,401.87, the S&P 500 .SPX lost 3.47 points, or 0.10%, to 3,547.03 and the Nasdaq Composite .IXIC dropped 142.29 points, or 1.21%, to 11,571.50.

The main U.S. indexes had hit intraday peaks on Monday after Pfizer Inc PFE.N said the vaccine it has been developing with German partner BioNTech SE BNTX.O was 90% effective against COVID-19.

U.S. Health Secretary Alex Azar said on Tuesday that if Pfizer submits its interim COVID-19 vaccine to health regulators as quickly as expected, the U.S. government expects to start vaccinations in December.

Biden hailed the vaccine progress but cautioned that it would be “many more months” before widespread vaccination is available. Meanwhile, daily new U.S. cases topped 100,000 for the sixth straight day.

Value-linked stocks .IVX, which tend to outperform coming out of a recession, added 1.2%, while growth stocks .IGX were down 0.98%.

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