Stock Market Today: Tech Stocks in Correction as Markets Tumble

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The stock market was falling again on Monday, without much in the way of bad news. Several risks remain for markets in October, which can also be a historically bad month for stocks. Big tech fell the most, with many in the group in correction territory.

In afternoon trading, the

Dow Jones Industrial Average
was down 285 points, or 1%, after the index rose 482 points Friday to close at 34,326. The

S&P 500
and the

Nasdaq Composite
were down 1.3% and 2.1%, respectively.

Technology stocks were particularly hard hit as bond yields rose. Rising yields often signify that investors see inflation and strong economic demand in the future. The 10-year Treasury yield ticked up to as high as 1.5% from 1.48%. It has risen from 1.31% in September, just before the Federal Reserve confirmed it will likely soon begin reducing its bond purchases, which could lower bond prices and lift their yields.

Apple (AAPL),

Amazon.com

(AMZN) and

Facebook

(FB) were down more than 11%, 14% and 15% from recent highs. Facebook was the biggest loser in tech, as the company is dealing with widespread outages. 

Other areas of the market weren’t falling as much. The

Invesco S&P 500 Equal Weight
Exchange-Traded Fund (RSP), which weights each holding in the index equally and reflects the breadth of stocks rising or falling, was down just 0.7%.

In general, risks still haven’t gone away. Supply chain constraints are disabling some companies from meetings sales goals, while higher costs associated with this are eating into profit margins. Higher corporate taxes could be on the way. Plus, bond yields are expected to keep rising, which makes future profits less valuable.

Analysts noted that the U.S. debt ceiling deadline in December and continuing political conflict over the $1 trillion infrastructure bill and $3.5 trillion reconciliation package muddied the waters.

“If the government were unable to lift or suspend the debt ceiling, the U.S. Treasury will find itself unable to make one of its outstanding debt payments,” wrote Jason Pride, chief investment officer of Private Wealth at Glenmede. That’s partly why, Pride said, short-term Treasury yields are higher; investors are demanding a premium return on government notes in case of default. The 1-month Treasury yield is up slightly, hitting as high as 0.2% from below 0.1% Friday. 

As for the S&P 500, October can be a difficult month, especially after a rough September. When the index falls in September, the S&P 500 rises only 54% of Octobers historically, according to Bank of America, with an average decline of 0.4%. The bank said October is also one of the more volatile months.

Meanwhile, the S&P 500 is down just over 5% from its all-time high, hit on Sept. 2. Technically, a correction is a 10% drop. “I do not think we have seen the bottom yet in stocks,” wrote Jay Pestrichelli, CEO of ZEGA Financial. “While September’s stock market declines were uncomfortable, they were far from a traditional 10% market correction.”

The S&P 500 fell below the 4,300 level on Monday, a somewhat troubling sign. Buyers had stepped in last month when the index was a touch above that level, but a harsh move below it could mean the index is ready to fall to 4,220, which would mark a 7% drop from the index’s all-time high, accoring to Fiona Cincotta, senior financial markets analyst at City Index.

Plus: Democrats Still Negotiating $3.5 Trillion Reconciliation Bill

Overseas, Hong Kong’s

Hang Seng Index
fell 2.2% with markets in mainland China closed for a holiday. The pan European

Stoxx 600
was down 0.5%.

Hong Kong was rocked as shares in heavily indebted property developer

China Evergrande

(ticker: 3333.H.K.) were suspended “pending the release by the Company of an announcement containing inside information about a major transaction.” Reports swirled in Chinese state-owned media that a rival,

Hopson Development
,
would buy a major Evergrande unit. Trading in Hopson (0754.H.K.) stock was also halted.

Also read: The Stock Market Has Put China Evergrande Concerns Behind It. Why That’s a Mistake.

Here are nine stocks on the move Monday:

Moderna

(MRNA) and

Novavax

(NVAX) were seeing their shares fall 5.2% and 1.8%, respectively, after news that

Johnson & Johnson

(JNJ) is seeking Food and Drug Administration authorization for its Covid-19 booster shot. Also,

Merck

(MRK) said Friday that its oral Covid-19 treatment is effective in reducing hospitalization risk. Merck shares were up 2.3%. 

Sage Therapeutics

(SAGE) and

Biogen

(BIIB) saw shares dip 2.3% and 2%, respectively, even after the companies announced effectiveness in a new depression treatment. 

Tesla

(TSLA) rose 1% after the electric-vehicle group reported a record quarter Saturday with deliveries up 70% from a year ago.

Akamai Technologies

(AKAM) stock dropped 2.6% after getting downgraded to Sector Weight from Overweight at KeyBanc Capital Markets. 

DuPont de Nemours

(DD) stock gained 1.4% after getting upgraded to Overweight from Neutral at JPMorgan. 

Adidas slipped 2.3% (ADS.Germany), after shares in the sportswear giant were downgraded to Underperform by Bank of America.

Write to Jacob Sonenshine at jacob.sonenshine@barrons.com