Tech stocks weigh on Wall Street

VIDEO: REUTERS

NEW YORK (REUTERS) - Wall Street's major indexes fell on Friday (July 27) as weak earnings reports from major technology companies led to a big drop for the sector.

Intel Corp shares sank 8.6 per cent after the chipmaker's data centre business missed estimates amid stiff rivalry from Advanced Micro Devices. AMD shares rose 3.2 per cent.

Twitter shares plunged 20.5 per cent after the social media network reported a decline in monthly active users, versus the increase analysts had expected, and warned of further drops as it deletes phony accounts.

The S&P 500 technology index fell 2 per cent, the most among the major S&P sectors. Shares of Apple, which is set to report quarterly results on Tuesday, fell 1.7 per cent.

Shares of Microsoft and Alphabet, which had soared after both companies recently reported strong quarterly results, dropped 1.8 per cent and 2.5 per cent, respectively. Alphabet shares touched an all-time high earlier in the session but reversed course.

The pressure on tech stocks started on Thursday after Facebook Inc gave a dismal forecast that caught investors off guard about growth prospects in a sector that has led the market's march towards record highs.

"There's a bit of concern perhaps growing that the bloom's off the rose for these tech stocks, that they are not invincible," said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.

The Dow Jones Industrial Average fell 76.01 points, or 0.3 per cent, to 25,451.06, the S&P 500 lost 18.62 points, or 0.66 per cent, to 2,818.82 and the Nasdaq Composite dropped 114.77 points, or 1.46 per cent, to 7,737.42.

The Nasdaq exceeded Thursday's losses to register once again its biggest daily percentage drop in a month.

For the week, the Nasdaq shed 1.06 per cent, but the S&P rose 0.61 per cent. The Dow, cushioned by promising developments in trade relations between the United States and the European Union earlier this week, added 1.57 per cent.

Intel and Twitter's disappointing results overshadowed data from the Commerce Department showing the US economy grew at a 4.1 per cent annualised rate in the second quarter, its fastest pace in nearly four years, on higher consumer spending and farmers rushing soybean shipments to China to beat tariffs.

Economists and investors cautioned against putting too much weight on the growth, which matched expectations, as the trade-related boost is expected to unwind later this year.

"It's old news," Ghriskey said. "Trade is bound to have an impact on the coming quarters if the tariff issue isn't resolved."

AbbVie shares fell 3.6 per cent after sales of its Humira drug in the second quarter barely beat Wall Street views, raising concerns about the drug's viability as a cash-cow.

Amazon.com shares jumped as much as 4 per cent to a record high of US$1,880.05 after the e-commerce giant forecast strong sales and posted a profit that was double analysts' estimates. Amazon shares closed up 0.5 per cent.

Declining issues outnumbered advancing ones on the NYSE by a 2.03-to-1 ratio; on Nasdaq, a 3.39-to-1 ratio favoured decliners.

The S&P 500 posted 25 new 52-week highs and three new lows; the Nasdaq Composite recorded 63 new highs and 99 new lows.

Volume on US exchanges was 6.81 billion shares, compared with the 6.04 billion average over the last 20 trading days.