Stocks Hit by Rout in Big Tech as Alphabet Sinks: Markets Wrap

(Bloomberg) — A selloff in some of the world’s largest technology companies dragged stocks to session lows, extending a slide that was earlier driven by geopolitical angst and bets the Federal Reserve will opt for a smaller rate cut next month.

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The S&P 500 fell 1% as Alphabet Inc. sank after a judge ruled it must lift restrictions that prevent developers from setting up rival marketplaces that compete with its Google Play Store. In the wake of surprisingly strong job growth for September, Treasuries continued to drop — with the 10-year yield topping 4%. Brent crude jumped to $80 a barrel, with mounting tensions in the Middle East raising speculation that Israel may attack Iran’s oil infrastructure.

“Friday’s strong jobs report not only appeared to kill any chance of a 50-basis-point rate cut in November, it kickstarted chatter about the Fed leaving rates unchanged if economic data continues to come in hotter than expected,” said Chris Larkin at E*Trade from Morgan Stanley. “But as last week showed, geopolitics can’t be ignored.”

To Dave Sekera at Morningstar, if there is any further geopolitical escalation, that would potentially spur the risk-off trade — with growth shares underperforming value ones.

“Typically, in a risk-off trade, you’re going to see rotation into defense stocks, but I’d be careful if you’re an investor today,” he said. “Some of the defensive sectors today are already overvalued. Unlike a typical risk-off trade, I think oil stocks would go up.”

The S&P 500 fell below 5,700. A gauge of the “Magnificent Seven” tech megcaps slipped 1.6%. Amazon.com Inc. slipped after a rare analyst downgrade that cited concerns over margin trends into next year, which growth in the cloud computing business is unlikely to compensate for. Pfizer Inc. climbed on a news report that activist investor Starboard Value has taken a stake of about $1 billion in the drugmaker.

Treasury 10-year yields rose five basis points to 4.02%. West Texas Intermediate crude climbed 4% to $77.32 a barrel.

Despite the drop in…

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