U.S. equities closed mixed on Thursday after the technology sector rolled over.
The Nasdaq composite closed 0.6 percent lower at 2,475.42 and fell more than 1 percent earlier in the session. The S&P 500 also closed lower at 6,382.19, slipping 0.1 percent as tech stocks dropped 0.8 percent to lead decliners. The tech sector had notched an intraday record earlier in the session, along with the Nasdaq and the S&P.
“You’re now seeing some pressure on the broader market after the initial pop at the open,” said Daniel Deming, managing director at KKM Financial. “It just feels like momentum is waning here.”
Tech faced pressure as investors took profits off the table following strong earnings from companies in the space.
The Dow Jones industrial average, outperformed, closing 85.54 points higher at a21,796.55 and notching intraday and closing records.
Earlier, tech was led higher by shares of Facebook, which initially soared as much as 5.96 percent to a record before paring gains.
The social media giant reported second-quarter earnings per share of $1.32 on revenue of $9.32 billion. Analysts polled by Reuters expected the company to post earnings per share of $1.13 on sales of $9.2 billion. The company also reported better-than-expected monthly active users, a key metric for Facebook.
Tech has been the stalwart of the U.S. stock market this year. The sector has spiked 23 percent in 2017, easily outperforming other sectors. Tech earnings have also outperformed expectations, as Alphabet and Netflix have also reported stronger-than-expected numbers.
Overall, this earnings season has been positive, with most S&P 500 companies topping profit and sales estimates. However, a lot of companies aren’t necessarily reinvesting their capital in themselves, said Omar Aguilar, CIO of equities at Charles Schwab Investment Management.
“That has a lot to do with what’s going on in Washington,” Aguilar said, referring to the uncertainty around the implementation of tax reform and fiscal stimulus from the Trump administration. He also said the market could face a correction later in the year if it becomes clear that tax reform won’t happen this year.
Uncertainty about what tax reform might look like grew Thursday after House speaker Paul Ryan said in a statement that a border adjustment tax is now off the table. Art Hogan, chief market strategist at Wunderlich Securities, said market participants are starting to think a new tax plan will be less than what was originally promised by the administration.
“You take that and couple it with the fact that transports are maybe signaling something in the economy that the broader market hasn’t picked up on, and it’s natural to see some profit-taking, especially in tech,” Hogan said.
Dow transports fell 3.11 percent and posted their worst day since 2016.
In economic news, initial jobless claims came in at 244,000, slightly above the expected 240,000. Durable goods orders, meanwhile, rose 6.5 percent in June.
The data releases came a day after the Federal Reserve hinted could start unwinding its massive $4.5 trillion balance sheet “relatively soon” if the economy moves along as expected.
“This isn’t like the Alan Greenspan days,” said Jeff Powell, managing partner at Polaris Greystone Financial Group. “Janet Yellen has mapped it out for us. SHe has said they want interest rates at 1 percent but only if we can get there.”