A Tough Streak for Tech

By Alex Eule  |  Tuesday, September 6

Unlucky Number Seven. Investors returned from the three-day weekend ready to turn the page on an uneven summer of trading. Stocks looked strong in pre-market trading this morning, and they were up at the open. But an August pattern of stocks losing steam throughout the day has now continued into September.

Today's turning point came at 10 a.m. when a new report from the Institute for Supply Management showed strong activity in the services sector. The ISM's services PMI showed unexpected  growth from a month ago, coming in at 56.9, versus an estimate of 55. New orders and business activity continue to grow and actually accelerated from a month ago. The price index, meanwhile, declined for the fourth straight month. 

It's not the picture of a recessionary economy. And, for investors, that's the problem. An economic slowdown might have been the best hope for a pause in Federal Reserve rate increases. Today's ISM report makes it a little more likely that the Fed will continue with its hikes, confident that the economy can withstand tighter monetary conditions. 

The futures market is now pricing in a 70% chance of a three-quarter point rate hike in September, up from 57% on Friday. Yields on the 2- and 10-year Treasury notes both moved up significantly today, with the 2-year settling at 3.499% and the 10-year at 3.339%. 

Not surprisingly, stocks -- particularly rate-sensitive growth stocks -- fell on the day. The tech-heavy Nasdaq Composite closed down 0.7%, its seventh consecutive decline. It's the Nasdaq's longest losing streak since November 2016. The Dow Jones Industrial Average fell 173 points, or 0.6%, while the S&P 500 was off 0.4%. 

"Stocks are going to struggle because too much of the economy is doing well and that leaves Wall Street vulnerable to an extended period of rising interest rates," Edward Moya, senior market analyst at OANDA, wrote today.

Tomorrow, the tech world will get something to focus on other than interest rates when Apple holds a product event where it's expected to announce new iPhone models.

The buzz for the new iPhone 14 is rather muted, with no huge new features expected from the latest models. Don't expect a big move for Apple stock either. Apple shares almost always fall on announcement day. Across the 21 iPhone announcement days, as tracked by Dow Jones Market Data, Apple shares have closed down an average of 0.46%.

The notable exception was when the first iPhone was shown off by Steve Jobs in January 2007. Apple shares rose 8.3% that day, kicking off a spectacular run. The stock is up another 4,574% since then. 

DJIA: -0.55% to 31,145.30
S&P 500: -0.41% to 3,908.19
Nasdaq: -0.74% to 11,544.91

The Hot Stock: Rollins +6.1%
The Biggest Loser: Moderna -6.1%  

Best Sector: Real Estate +1.0%
Worst Sector: Communication Services -1.2%