Growth and momentum stocks, the linchpin of the 9½-year bull rally, were under renewed pressure Monday, as investors continued their retreat from those companies. Tech stocks in the S&P 500 fell 0.8% after being down more than 1% earlier in the session, while other bastions of growth companies in the broad index, including consumer-discretionary stocks, declined 0.2%.
A combination of fast-rising bond yields and continuing trade fears has stirred investors to cut riskier stocks from their portfolios, who are worrying that the huge profit margins among many of these companies will fall. Meanwhile, consumer-staples and real-estate stocks each rose nearly 1%, as investors moved into sectors of the stock market that tend to be more durable in challenging economic conditions.
“I’m starting to seriously worry that markets may trigger an economic downturn earlier than widely expected, driving a self-fulfilling market adjustment toward more normal (long-term) valuations,” said Erik F. Nielsen, group chief economist at UniCredit Bank, in a note to clients. “There is little chance global policy makers will come to the rescue in time.”
The S&P 500 fell 0.1% in recent trading, while the Dow Jones Industrial Average added 15 points, or less than 0.1%, to 25355. The tech-heavy Nasdaq Composite fell further, shedding 0.5%. Shares of Netflix fell 2.2%, while Amazon slipped 1.3%. Both stocks are down 12% so far this month.
Salesforce.com , another growth stock, fell 2.7%, and Adobe shed 3%. The losses shaved 0.4% from the Russell 1000 Growth index Monday, deepening its losses for the quarter to 6.6%, putting the benchmark on pace to snap a 12-quarter run of gains. In Europe, the region’s broad index, the Stoxx Europe 600, was flat after negotiations around the U.K.’s impending departure from the European Union suffered a fresh setback Sunday, with the two sides failing to find a compromise on the issue of the Irish border.
“A no-deal Brexit is likely to further curb growth expectations and therefore the attractiveness of the U.K.,” said Louise Dudley, Global Equities Portfolio Manager, at Hermes Investment Management. “Broadly our expectation is that we are likely to see higher costs for businesses.”