Markets dip on Wall Street as tech stock falls

WALL Street stocks fell yesterday as investors locked in gains on a recent rally ahead of possible policy action from the Federal Reserve later this week, while weakness in Intel shares weighed on the Nasdaq.

The benchmark S&P 500 index closed at highs last week not seen in nearly five years, motivating some investors to pull back from those gains Monday ahead of the Federal Reserve’s decision on Thursday.

“The markets are up a lot, so the short-term risks are on the downside,” said Jim Awad, managing director at Zephyr Management in New York.

Shares of Intel lost nearly four per cent after several brokerages cut price targets on the chipmaker. Shares of Apple, the world’s largest publicly traded company by market value, dropped more than two per cent as the market’s weakness was felt most in tech shares.

Investors are on guard against the unknown outcomes of several events this week, including a ruling by Germany’s constitutional court tomorrow on the legality of the Eurozone’s permanent financial rescue fund and the Fed decision on Thursday.

Expectations for more stimulus from central banks in the United States and Europe have underpinned markets in recent weeks.

The Fed looks set to launch a third round of bond purchases this week and economists said Friday’s weak report on jobs growth for August was likely to convince the US central bank a looser monetary policy was needed.

Analysts said the uptrend for markets remains intact, and traders were eyeing the 1,440 level on the S&P as the next barrier to further gains.

“When you have the central banks... practicing loose monetary conditions, you basically have a put on the market. And even any weakness that does develop should be somewhat contained,” said Michael Gibbs, co-head of equity advisory group at Raymond James in Memphis, Tennessee.

The Dow Jones industrial average ended down 52.35 points, or 0.39 per cent, at 13,254.29. The Standard & Poor’s 500 Index closed down 8.84 points, or 0.61 per cent, at 1,429.08. The Nasdaq Composite Index dropped 32.40 points, or 1.03 per cent, to 3,104.02.

Investors sold some big-cap tech names that have done well all year. Worse-than-expected data on imports from China added to selling in the sector.

Chinese import data showed a fall of 2.6 per cent on the year in August, short of expectations for a 3.5 per cent rise. Exports grew 2.7 per cent, below forecasts for a three per cent rise.

American International Group shed two per cent to $33.30 after the US Treasury Department said it will sell most of its stake in the insurer, making the government a minority investor for the first time since it rescued the company.