Trump's Qualcomm takeover ban sends tech stocks tumbling

Updated: The OECD lifts its growth projections in its latest Interim Economic Outlook.

Stocks on Wall Street turned lower as technology and financial shares declined in the wake of a White House ban on a major merger deal that eclipsed new inflation data.

In another big political move, President Donald Trump sacked Secretary of State Rex Tillerson, replacing him with CIA director Mike Pompeo, who in turn will be replaced by his deputy, Gina Haspel.

The inflation data showed consumer prices increased more modestly in February than in the previous month, initially pushing Dow stocks up 197 points.

Other positive news came in an upgrade by the OECD of US economic prospects.

However, tech stocks in the S&P 500 fell 1.2%, led by a 5.0% drop in shares of Qualcomm after President Trump blocked Broadcom’s $US117 billion hostile takeover bid on national security grounds.

Financial stocks fell 1.1%, alongside a decline in bond yields.

At the close in New York, the Dow Jones Industrial Average was down 171.58 points, or 0.7%, to 25,007.03. The S&P 500 lost 0.6% to 2765.31 and the Nasdaq Composite tumbled 1.0% to 7511.01.

Jonathan Corpina, senior managing partner for Meridian Equity Partners, says the market has depended on news as a propeller.

“When you get a little bit of a drought, it seems like we get that pullback,” he says, adding that he thinks investors are “reluctant” to decide which way to go.

The consumer-price index rose 0.2% in February after climbing a seasonally adjusted 0.5% in January.

Erik Davidson, chief investment officer for Wells Fargo Private Bank, says the market doesn’t have “to fear an extremely aggressive Fed.”

He expects the Federal Reserve to stay on track for three interest-rate increases this year.

“Because of this inflation data … the Fed is not necessarily going to need to act more quickly,” he says.

The yield on US 10-year Treasurys settled at 2.848%, down from 2.870% on Monday.

OECD lifts projections
The OECD has lifted its growth projections in its latest Interim Economic Outlook.

US tax cuts and government spending increases will boost growth to 2.9% this year and 2.8% next, compared with the 2.5% and 2.1% expansions it forecast in November.

Global economic growth will pick up to 3.9% in both this year and next, compared with previous forecasts of 3.7% and 3.6%.

“That’s fairly close to the historic average,” says Alvaro Pereira, the OECD’s acting chief economist. “The world economy is a lot stronger than it used to be.”

It sees continued pickups in a number of other large economies including “significant” accelerations in Germany, France, Mexico, Turkey and South Africa.

But there are clouds on the horizon, as the OECD warns the global pickup could be weakened by a series of tit-for-tat tariff increases initiated by proposed US charges on steel and aluminium imports.

The Stoxx Europe 600 slipped 1%. France’s CAC 40 eased 0.6%, Germany’s DAX fell 1.6% and the UK’s FTSE 100 dropped 1.05%. 

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