Stocks skid as Apple pulls tech companies lower
U.S. stocks took their biggest loss in three weeks on Thursday after a late sell-off. Apple, which is mired in a slump, fell to its lowest price in about two months and dragged the tech sector sharply lower.
Tech stocks rose early in the day thanks to earnings gains from Facebook and PayPal, then slumped after billionaire investor Carl Icahn disclosed that he’d sold his stake in Apple. Icahn wasn’t a major shareholder in the tech giant, but his moves are closely watched by many investors.
The Dow Jones industrial average fell 210.79 points, or 1.2%, to 17,830.76. The Standard & Poor’s 500 index sank 19.34 points, or 0.9%, to 2,075.81. The Nasdaq composite closed lower for the sixth day in a row, dropping 57.85 points, or 1.2%, to 4,805.29. That index has struggled in part because Apple, the most valuable public company in the world, has fallen 15% in two weeks.
Earlier in the day, indexes had wavered between small gains and losses. Investors were surprised the Bank of Japan decided not to take further action to stimulate that nation’s economy, and the yen continued to gain strength against the dollar.
“All they did was delay the inevitable,” Scott Wren, global equity strategist for Wells Fargo’s Investment Institute, said of Japan’s central bank. “All these global central banks, they’re going to come out guns blazing” to stimulate their economies.
A handful of stocks moved on deal news, most of them in healthcare. In the largest, medical device maker Abbott Laboratories said it would buy St. Jude Medical, combining Abbott’s heart devices, heart valve products and infant formula business with St. Jude’s heart failure and heart rhythm device products.
St. Jude rocketed 25.6% to $77.79 while Abbott fell 7.8% to $40.42.
“Companies are on the hunt for ways to increase their profitability,” Wren said. “One way to do that is to buy somebody else.”
That task is made easier, he added, by low interest rates on loans and the fact that companies have been slashing their expenses for years.
French drugmaker Sanofi went public with an offer to buy cancer drug maker Medivation for $9.3 billion, or $52.50 per share. Shares of Medivation, which makes the prostate cancer medication Xtandi, climbed 7.9% to $56.17.
Drugmaker AbbVie said it would buy privately held Stemcentrx for $5.8 billion. Stemcentrx is developing a drug that uses stem cells to treat small cell lung cancer. AbbVie stock rose 50 cents to $61.20.
Comcast’s NBCUniversal unit will buy DreamWorks Animation, the movie studio behind the “Kung Fu Panda” and “How to Train Your Dragon” franchises, for $3.55 billion. The deal values DreamWorks at $41 a share, and the stock, which jumped 19% Wednesday in anticipation of the deal, rose an additional 24.1% to $39.96.
Hanesbrands, a maker of underwear, T-shirts and socks, said it would buy the biggest maker of underwear in Australia. Hanesbrands said its offer values Pacific Brands Ltd. at $800 million. Hanesbrands has also made a series of deals to give it more control of the Champion brand overseas. The stock jumped 6.3% to $29.53.
Apple fell 3.1% to $94.83 after Icahn’s announcement to CNBC. Apple sank 6% Wednesday after reporting its first revenue decline in more than a decade as iPhone sales fell.
Apple’s loss canceled out a gain for Facebook, which reached an all-time high. The social network’s first-quarter profit nearly tripled, and its revenue was also better than expected. The stock climbed $7.84, or 7.2%, to $116.73.
The U.S. economy grew a bit less than expected in the first quarter. The government said gross domestic product increased just 0.5% as consumer spending slowed, exports kept falling and business investment plunged. That’s the weakest result in two years, but experts think the economy will bounce back in the current quarter. It has followed that pattern over the last few years.
Bond prices continued to rise after a big gain Wednesday. The yield on the 10-year U.S. Treasury note fell to 1.83% from 1.85%.
Consumer stocks also struggled. Harman International, which makes automotive electronics and audio equipment, reported first-quarter results that didn’t meet analysts’ projections. The company also cut its forecasts for the rest of the year. Harman said revenue from a unit that serves restaurants, sports arenas and other businesses fell. Its stock dropped 13.3% to $77.07.
European stock indexes were mixed. Germany’s DAX was 0.2% higher and the CAC 40 in France and the FTSE 100 index in Britain were little changed.
Asian stocks mostly fell after the Bank of Japan’s decision. The Nikkei 225, Japan’s main stock index, tumbled 3.6%.
The dollar sank to 108.09 yen from 111.34 yen. The euro rose to $1.1351 from $1.1323.
Benchmark U.S. crude oil, which is at its highest prices in almost six months, rose 70 cents, or 1.5%, to $46.03 a barrel in New York. Brent crude, the international standard, climbed 96 cents, or 2%, to $48.14 a barrel in London.
Wholesale gasoline rose 2 cents to $1.60 a gallon. Heating oil rose 3 cents to $1.41 a gallon. Natural gas fell 4 cents to $2 per 1,000 cubic feet.
Gold rose $16, or 1.3%, to $1,266.40 an ounce. Silver jumped 26 cents, or 1.5%, to $17.55 an ounce. Copper rose 1 cent to $2.22 a pound.
