Tech stocks rebound as Amazon overtakes Alphabet-Google, Facebook slumps

Updated: Facebook falls another 2.6% as its use of data raised possibility of government intervention.

Stocks on Wall Street rose as the market showed signs of stabilising a day after technology shares led a broad downturn amid concerns the sector may face greater government scrutiny.

At the close of trading in New York, the Dow Jones Industrial Average climbed 116.36 points, or 0.5%, to 24,727.27. The S&P 500 rose 0.1% to 2716.94 and the technology-heavy Nasdaq Composite rose 0.3% to 7364.30 after the indexes on Monday logged their biggest daily losses since February 8 as tech stocks led a broad downturn.

The tech sector of the S&P 500 fell 0.2% even as shares of Facebook fell a further 2.6% after sliding 6.8% on Monday and wiping out about $US36 billion in market value.

The Federal Trade Commission is investigating the company over the use of personal data by an analytics firm tied to President Donald Trump’s campaign.

Social media stocks, like Twitter, which dropped 10%, remained under pressure, while Oracle fell 9.4%, a day after releasing guidance that didn’t impress investors. Other tech giants, though, staged a rebound.

Amazon overtakes Alphabet
Amazon rose 2.7%, overtaking Google parent Alphabet  for the first time to become the second biggest US company. Amazon closed at $US1586.51, giving it a market value of $US768 billion, while Alphabet shed 0.4% to $US1095.80, lowering its market cap to about $US763 billion. Apple has the largest market cap, at $US889 billion.

The concerns about the industry stem from reports that Cambridge Analytica, which helped President Donald Trump’s 2016 election campaign, had collected information from millions of Facebook users and used it without permission. Cambridge Analytica has said it complied with Facebook’s rules.

Michael Farr, chief executive of investment management firm Farr, Miller & Washington, says Facebook could have responded to the news better.

But even so, he thinks this is a good time to add more shares of the company to his portfolio given Facebook’s balance sheet.

“There is a sort of broader concern over the Facebook news about how consumers’ data is used and protected,” he says. “The market doesn’t like it.”

David Older, head of equities at Carmignac, believes the market has overreacted to the Facebook news.

“When you think about growth rates [in stocks], this is the only place [the technology sector] globally where you are seeing strong growth,” he says. “I think a lot of investing in tech nowadays is about gathering data, so when you get question marks like these, it gives people pause.”

Energy prices rise
Meanwhile, the Dow’s gains were buoyed by shares of Boeing, up 1.8%, and Caterpillar, up 1.3%. Both stocks had been beaten down in recent sessions by worries about the Trump administration’s plans to roll out tariffs on steel and aluminium imports.

The energy sector in the S&P 500 added 0.8% as US crude oil prices rose 2.2% to $US63.40 a barrel.

The yield on the benchmark 10-year Treasury note rose to 2.881% from 2.844% on Monday.

At the same time, money managers are grappling with other worries: Mr. Trump’s protectionist agenda has sparked opposition among world leaders, increasing fears of an escalating global trade spat.

“We think the market will remain volatile in the next few days because of the news flow, not only the technology sector but also the FOMC [Federal Reserve open market committee] meeting and the possibility of tariffs between the US and China,” says Jack Siu, investment strategist for Asia-Pacific at Credit Suisse.

Investors are concerned that an increase in inflation could drive central banks to tighten monetary policy quicker than expected.

Money managers are trying to gauge whether the Fed’s new chairman, Jerome Powell, will keep to three rate increases in 2018 – futures markets give this scenario a 64% chance, compared with 74% a month ago – or will raise rates four times instead.

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