US stocks have slumped for a third day in a row with investors worrying about whether high-flying technology stocks are overvalued and cautiously anticipating earnings season.
The Dow Jones Industrial Average tumbled 166.84 points (1.02 per cent) to 16,245.87.
The broad-based S&P 500 sank 20.05 (1.08 per cent) to 1,845.04, while the tech-rich Nasdaq Composite Index declined 47.97 (1.16 per cent) to 4,079.75.
The losses followed weakness since the middle of last week. Technology and biotech stocks have been among the feeblest equities, although a handful of hard-hit equities posted gains on Monday.
“Most of this selling has concentrated on these darling stocks and I guess investors are questioning their value,” said Peter Cardillo, chief market economist at Rockwell Global Capital.
Cardillo also attributed the losses to “a little anxiety before earnings”.
Earnings season unofficially kicks off on Tuesday with Alcoa after the markets close and with reports on Friday from banking giants JPMorgan Chase and Wells Fargo.
Weak technology stocks included LinkedIn (-3.7 per cent), Yahoo (-3.5 per cent) and Tesla Motors (-2.2 per cent). Apple lost 1.6 per cent and Google fell 0.9 per cent.
But some other tech and biotech stocks bounced back. Biogen advanced 2.1 per cent, while Facebook added 0.4 per cent and Netflix edged up 0.2 per cent.
Financial stocks were generally weak, including Bank of America (-2.0 per cent), Wells Fargo (-1.8 per cent) and Dow members Goldman Sachs (-2.9 per cent) and American Express (-2.9 per cent).
A handful of companies in the Dow posted increases, including technology companies IBM (+1.4 per cent), Intel (+1.2 per cent) and Cisco (+0.6 per cent).
Cardillo said some investors may be moving funds out of “darling” momentum stocks to more “defensive” names. IBM, Intel and Cisco all pay dividends.
Ireland-based Mallinckrodt announced it will buy US rival Questcor Pharmaceuticals in a roughly $US5.6 billion ($A6.05 billion) cash-and-stock deal expected to expand the firm’s drive in the specialty drugs field. Questcor shot up 18.7 per cent; Mallinckrodt fell 2.5 per cent.
Dow member Pfizer slumped 3.0 per cent despite reporting over the weekend that its palbociclib treatment resulted in “significantly prolonged” survival rates for patients with advanced breast cancer. However, Morgan Stanley said the timing for regulatory approval remained unclear.
Bond prices rose. The yield on the 10-year US Treasury declined to 2.70 per cent from 2.73 per cent on Friday, while the 30-year dipped to 3.56 per cent from 3.59 per cent. Bond prices and yields move inversely.
