By Sinéad Carew and Shristi Achar A
(Reuters) – The S&P 500 and Nasdaq fell on Thursday, with the biggest drag from Apple and weakness in chip stocks over concerns about China’s iPhone curbs, while a fall in weekly U.S. jobless claims fed worries about interest rates and sticky inflation.
Shares in S&P heavyweight Apple Inc fell for a second straight day on news that China had widened curbs on iPhone use by state employees, requiring staff at some central government agencies to stop using their mobiles at work.
Bloomberg reported that China planned to broaden the iPhone ban to state firms and agencies.
The drag from Apple, its suppliers and companies with large China exposure pushed the S&P 500 technology sector lower making it the biggest percentage decliner among the benchmark’s 11 major sectors during the session.
A U.S. Labor Department report showed the number of Americans filing for unemployment claims fell to 216,000 for the week ended Sept. 2, hitting the lowest level since February. But investors worried this could encourage the Federal Reserve to continue with tight monetary policy, pressuring stocks.
“The weekly claims was big news this morning, good news being construed as bad news and it’s hard to ignore the news out of China,” about Apple said Sahak Manuelian, managing director and head of equity trading at Wedbush Securities.
Investors were also warily anticipating inflation readings from August, due out in a week.
Due partly to the recent sharp rise in oil prices, Manuelian pointed to “some fretting among investors that inflation might start to pick up again, which isn’t crazy.”
Bets on the Fed to leave interest rates unchanged in September stood at 93%, yet the chances for another pause in the November meeting were at a much lower 53.5%, according to the CME Group’s FedWatch Tool.
“There is that very, very small eye of the needle with which the Fed can thread monetary policy that’s sufficiently tight, but not so tight that it wrecks the economy. It’s a small eye but, it’s not completely closed,” said said Craig Fehr, head of investment strategy at Edward Jones, who called Thursday’s decline “a cautious defensive stance.”
According to preliminary data, the S&P 500 lost 13.94 points, or 0.31%, to end at 4,451.54 points, while the Nasdaq Composite lost 123.64 points, or 0.89%, to 13,748.83. The Dow Jones Industrial Average rose 60.44 points, or 0.18%, to 34,503.63.
The Dow was outperforming the S&P and Nasdaq because Apple ranks just 11th in the cyclicals-heavy index, which is price-weighted compared with the market capitalization-weighted S&P 500, where Apple is one of the biggest weights.
Defensive utilities was outperforming S&P sectors during the session, which Edward Jones’ Fehr saw another sign of the market’s risk-off mood on Thursday.
The Philadelphia semiconductor index fell while shares of Apple suppliers including Skyworks Solutions, Qualcomm and Qorvo were in the red all day.
Rick Meckler, partner at Cherry Lane Investments said the news from China refocused investors on the idea “that the relationship between the U.S. and China is a big risk to current equity prices, particularly in technology.”
Also denting sentiment about the world’s second-largest economy, data showed China’s exports and imports fell in August.
Shares of U.S.-listed Chinese firms PDD Holdings, JD.com, Alibaba and Baidu also Fell.
Also keeping the Dow afloat was a rise in McDonald’s shares after Wells Fargo upgraded the stock to “overweight”.
Automation software firm UiPath rallied on an upbeat annual revenue forecast.
(Reporting by Sinéad Carew in New York, Shristi Achar A and Amruta Khandekar in Bengaluru; Additional reporting by Johann M Cherian; Editing by Vinay Dwivedi and David Gregorio)
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