Wall Street edges lower as tech stocks, bond yields weigh

NEW YORK (Reuters) – Wall Street fell into negative territory on Monday as signs of soft smartphone demand took a toll on tech stocks and a rise in bond yields dented demand for equities, offsetting optimism on earnings.

Tech stocks were a drag on all three major U.S. indexes ahead of a big week of earnings for the sector. Chipmaker shares fell after the world’s largest contract chipmaker, Taiwan Semiconductor Manufacturing Co Ltd (2330.TW), cut its full-year revenue target due to softer demand for smartphones.

Yields on 10-year U.S. Treasuries US10YT=RR rose to their highest level since January 2014 amid concerns over the growing supply of government debt and accelerating inflation.

While rising yields can lead investors away from equities, the robust earnings season gave reason for confidence.

“Earnings continue to be healthy and in many respects exceed market expectations. It continues to suggest an overall strength in the economy, and we’re seeing more and more above-trend growth,” said Steven Baffico, chief executive officer at Four Wood Capital Partners in New York.

“One good quarter does not a year make, but I think you can look at overall strength in earnings as a good leading indicator for the equity market,” said Baffico.

Analysts expect earnings growth at S&P 500 companies of nearly 20 percent in the first quarter, the strongest showing in seven years, according to Thomson Reuters data.

Quarterly results are expected this week from 181 S&P 500 companies, including technology heavy-hitters Facebook Inc (FB.O), Microsoft Corp (MSFT.O), Amazon.com Inc (AMZN.O) and Intel Corp (INTC.O). Alphabet Inc (GOOGL.O) reports after the market closes on Monday.

FILE PHOTO: Traders work on the floor of the New York Stock Exchange in the Manhattan borough of New York City, New York, U.S., April 20, 2018. REUTERS/Brendan McDermid

Alphabet is expected to post first-quarter adjusted earnings per share of $9.28. Heightened options activity ahead of Alphabet’s report implied a 4.9 percent stock price swing in either direction by Friday.

At 3:13PM ET, the Dow Jones Industrial Average .DJI fell 58.33 points, or 0.24 percent, to 24,404.61, the S&P 500 .SPX lost 4.48 points, or 0.17 percent, to 2,665.66, and the Nasdaq Composite .IXIC dropped 27.71 points, or 0.39 percent, to 7,118.42.

Of the 11 major S&P sectors only telecom .SPLRCL and healthcare .SPXHC were in positive territory.

The Philadelphia Semiconductor index .SOX was down 1.2 percent and was on track for its fourth straight session of declines on concerns of slowing smartphone demand.

Merck & Co Inc (MRK.N) helped lift the healthcare sector, up 2.3 percent following a Goldman Sachs upgrade to “buy.” {nL3N1S051J]

Aluminum company stocks dropped as the United States opened the door to sanctions relief for Russian aluminum giant United Company Rusal Plc (0486.HK). Alcoa (AA.N) tumbled 13.9 percent and Arconic fell (ARNC.N) 4.8 percent, making it the biggest percentage loser on the S&P.

Declining issues outnumbered advancing ones on the NYSE by a 1.88-to-1 ratio; on Nasdaq, a 1.81-to-1 ratio favored decliners.

Reporting by Stephen Culp; Editing by Leslie Adler

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