WASHINGTON (REUTERS) - Wall Street was pulled lower by a selloff in technology shares at the open on Tuesday, while investors awaited clues on interest rate hikes from Federal Reserve Chair Janet Yellen's talk in London.
The technology index fell 0.7 per cent due to a drop in the shares of Apple, Microsoft and Alphabet. Alphabet fell 1.2 per cent to US$960.55 (S$1,033) after EU antitrust regulators hit the tech giant with a record US$2.7 billion fine.
Since the beginning of the year, the tech index has jumped about 19 percent, making it the biggest force behind the S&P's record-setting rally.
However, the sector has come under pressure of late over concerns about lofty valuations. To make matters worse, investors are also shifting to high-dividend paying defensive sectors such as utilities in a rising interest rate environment. "The indices continue to hover near the very high end of the recent ranges, suggesting this week's end-of-the-quarter window dressing is likely to see more sector rotation," Peter Cardillo, chief market economist at First Standard Financial, wrote in a note. "The broadening out of the markets, we believe, is essential for the markets to escape a near-term correction."
Ms Yellen is scheduled to take part in a discussion on global economic issues in London at 1 p.m. ET (1:00 am Singapore time). Investors expect Yellen to offer more insight into the state of the U.S. economy, which would support the Fed's forecast of a rate hike this year.
Fed officials have signaled that they would look through a slowdown in inflation and continue on their current path for hikes. But investors are skeptical and market pricing shows only a 40 percent chance of a rate hike at the Fed's December meeting.
At 9:38 a.m. ET, the Dow Jones Industrial Average was down 25.84 points, or 0.12 per cent, at 21,383.71 and the S&P 500 was down 5.01 points, or 0.20 per cent, at 2,434.06. The Nasdaq Composite was down 28.06 points, or 0.45 per cent, at 6,219.09.
Seven of the 11 major S&P 500 sectors were lower, with the telecommunications index's 1.16 percent fall leading the decliners.