Thursday June 15th

15-06-2017

Dow futures down 100 points as tech selling returns; Alphabet falls in early trading

Large-cap technology stocks fell Thursday, dragging Nasdaq futures lower. Dow futures declined by nearly 100 points as worries about the effects of rate hikes and the removal of stimulus by the Federal Reserve hit the broader market. Shares of Facebook, Amazon, Apple, Neftlix, Google-parent Alphabet and Tesla also were lower before the opening bell. Nasdaq futures pointed to a sharply lower open for the tech-heavy index, falling nearly 60 points. Analysts at Canaccord Genuity downgraded Alphabet's stock to hold from buy, noting they believe the ad load increases on mobile search and YouTube from the past two years will "be hard to repeat." Technology has been on a tear this year, with the S&P tech sector rising about 18 percent to easily outperform other industries. This year's best-performing sector has been under pressure recently amid growing valuation concerns. Earlier this week, the sector completed its largest two-day decline since December. In a note to clients Thursday, Jefferies strategist Sean Darby compared the technology stock run we're seeing now to the "melt-up" that occurred in the late-1990s. Darby noted that both periods had declining inflation and low rates, alongside a thriving digital economy. But ultimately that didn't end well. "After Y2K occurred, the Fed lifted rates which eventually evaporated the cheap financing that had underwritten the technology boom," Darby said. The Fed raised interest rates Wednesday for the second time in 2017 and the fourth time since December 2015. It also said it plans to start unwinding its monster $4.5 trillion balance sheet this year. Asian equities closed mostly lower on Thursday after the U.S. Federal Reserve raised interest rates for the second time this year, as was widely expected by markets. The Nikkei 225 edged lower by 0.26 percent, or 51.7 points, to close at 19,831.82, and the Kospi gave up earlier gains to close down by 0.46 percent, or 10.99 points, at 2,361.65. Markets in greater China were mixed, with the Hang Seng Index lower by 0.95 percent at 3:00 p.m. HK/SIN. On the mainland, the Shanghai Composite edged higher by 0.06 percent, or 1.9934 points, to end at 3,132.6674, and the Shenzhen Composite rose 0.914 percent, or 16.9269 points, to finish the session at 1,869.7122. Oil prices dropped to six-week lows on Thursday, under pressure from high global inventories and doubts about OPEC's ability to implement agreed production cuts. Brent crude oil hit a session low of $46.70 a barrel, its weakest since May 5 and just above six-month lows, before recovering a little ground to trade around $46.86, down 14 cents, by 8:30 a.m. ET (1230 GMT). U.S. light crude fell to a six-week low of $44.32. It last traded down 21 cents at $44.52. Gold dipped on Thursday, weighed down by a stronger dollar as investors began to assess the potential for another U.S. rate hike later in the year. Spot gold fell 0.62 percent to $1,252.91 per ounce. This represents its weakest mark since May 26, a session when it reached a low of $1,256.65 in the previous session. U.S. gold futures for August delivery fell 1.69 percent to $1,254.40 an ounce.