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S&P 500, Nasdaq retreat as tech stocks lose favor

NEW YORK (Reuters) – The S&P 500 and the Nasdaq fell on Tuesday as investors favored sectors that suffered most during the pandemic over those that benefited from virus lockdowns and social distancing due to optimism that a COVID-19 vaccine would help the economy rebound.

The front facade of the New York Stock Exchange (NYSE) is seen in New York City, New York, U.S., November 9, 2020. REUTERS/Brendan McDermid

The heavyweight technology .SPLRCT, communication services .SPLRCL and consumer discretionary sectors .SPLRCD dropped sharply while investors moved to small cap stock indexes and sectors such as energy .SPNY, industrials .SPLRCI and consumer staples .SPLRCS.

Also chip stocks such as Nvidia NVDA.O were a drag on the technology sector as Apple Inc AAPL.O introduced its first notebook computer with an Apple-designed microprocessor.

“One of the reasons tech is down is the same reason everything else is up. It’s the reopening trade. To the extent the economy can reopen sooner rather than later the stay-at-home stocks won’t be as valuable,” said Jim Paulsen, chief investment strategist at The Leuthold Group in Minneapolis.

Amazon.com Inc AMZN.O, Facebook Inc FB.O and Microsoft Corp MSFT.O, which have boomed during this year’s work-from-home trend and powered Wall Street to new highs, extended Monday’s losses, weighing on the tech-heavy Nasdaq.

Trading was choppy as some investors monitored for election uncertainty after U.S. Secretary of State Mike Pompeo became the latest Republican to suggest that President Donald Trump would not concede the White House to Democrat Joe Biden.

But Leuthold’s Paulsen said most market participants have been largely ignoring the Trump administration’s complaints about the election outcome because they have not produced any evidence of a problem with vote counts.

At 2:55 p.m. EST, the Dow Jones Industrial Average .DJI rose 243.9 points, or 0.84%, to 29,401.87, the S&P 500 .SPX lost 3.47 points, or 0.10%, to 3,547.03 and the Nasdaq Composite .IXIC dropped 142.29 points, or 1.21%, to 11,571.50.

The main U.S. indexes had hit intraday peaks on Monday after Pfizer Inc PFE.N said the vaccine it has been developing with German partner BioNTech SE BNTX.O was 90% effective against COVID-19.

U.S. Health Secretary Alex Azar said on Tuesday that if Pfizer submits its interim COVID-19 vaccine to health regulators as quickly as expected, the U.S. government expects to start vaccinations in December.

Biden hailed the vaccine progress but cautioned that it would be “many more months” before widespread vaccination is available. Meanwhile, daily new U.S. cases topped 100,000 for the sixth straight day.

Value-linked stocks .IVX, which tend to outperform coming out of a recession, added 1.2%, while growth stocks .IGX were down 0.98%.

(GRAPHIC: 5-yr performance gap between growth and value stocks – )

The apparent breakthrough in a coronavirus vaccine may weaken the case for another large U.S. fiscal stimulus bill, although some investors say that relief is still needed for struggling businesses.

Senate Majority Leader Mitch McConnell, a Republican, said on Tuesday he saw no need for a multitrillion-dollar coronavirus relief bill. {nW1N2CF04Y]

Amgen Inc AMGN.O gained 2.9% after its asthma drug, being developed in collaboration with AstraZeneca AZN.L, met the main goal of a late-stage study.

Ulta Beauty Inc ULTA.O rose 2.9% after the cosmetics store chain signed a long-term deal with Target Corp TGT.N to open its own stores at the big box retailer’s locations. Target gained about 2%.

Advancing issues outnumbered declining ones on the NYSE by a 1.78-to-1 ratio; on Nasdaq, a 1.52-to-1 ratio favored advancers.

The S&P 500 posted 10 new 52-week highs and no new lows; the Nasdaq Composite recorded 73 new highs and 19 new lows.

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