Wall St falls as tech stocks weaken on hawkish Fed minutes; cyclicals rise

© Reuters. FILE PHOTO: The Wall Street sign is seen in front of the New York Stock Exchange January 22, 2008. REUTERS/Chip East

By Devik Jain

(Reuters) - Wall Street's main indexes fell in choppy trading on Thursday after minutes from the Federal Reserve's last meeting struck a hawkish note, pushing down shares of big technology companies and buoying economy-sensitive cyclical sectors.

Six of the 11 major S&P sectors fell in early trading, while value-oriented energy, financials and industrials rose.

Technology and consumer discretionary, the sectors hosting some of the biggest growth stocks including Microsoft Corp (NASDAQ:MSFT), Amazon.com Inc (NASDAQ:AMZN) and Apple Inc (NASDAQ:AAPL), fell more than 1% each.

"Tech stocks have got more of their earnings power coming but they're much more sensitive to a higher discount rate," said Dave Grecsek, managing director in investment strategy and research at Aspiriant.

"We've barbelled our equity position, so we like the more cyclically-sensitive equities in the U.S. ... these would be stocks like the traditional financials, industrials and staples that have room to run."

The Dow slipped from an intra-day record high after minutes from the Fed's December meeting signaled the possibility of sooner-than-expected rate hikes and stimulus withdrawal to curb inflation.

The tech-heavy Nasdaq plunged more than 3% on Wednesday, its biggest one-day percentage drop since February.

"The hawkish tone of the FOMC (the Federal Open Market Committee) minutes suggests that the central bank is concerned about inflation," said Nancy Davis, founder of Quadratic Capital Management.

"We believe the Fed is likely to be more prudent and take longer than the market expects to evaluate the economy before embarking on a swift rate hiking cycle and balance sheet reduction plan."

So far this week, market participants have rotated out of technology-heavy growth shares and into cyclical names such as industrials, energy and materials that stand to benefit the most in a high interest rate environment.

The banking sub-index rose 1.0%, tracking the benchmark U.S. 10-year Treasury yield, which touched its highest level since April 2021 on Thursday. [US/]

At 10:15 a.m. ET, the Dow Jones Industrial Average was down 147.18 points, or 0.40%, at 36,259.93, the S&P 500 was down 17.96 points, or 0.38%, at 4,682.62, and the Nasdaq Composite was down 135.79 points, or 0.90%, at 14,964.39.

After a stronger-than-expected ADP private payrolls report on Wednesday, the Labor Department's more comprehensive nonfarm payrolls data for December will be closely watched on Friday.

Data on Thursday showed the number of Americans filing new claims for unemployment benefits rose last week. Another report showed U.S. services industry activity slowed more than expected in December, but supply bottlenecks appear to be easing.

Netflix Inc (NASDAQ:NFLX) slipped 3.9% after J.P. Morgan cut its price target on the movie streaming platform's stock.

Declining issues outnumbered advancers for a 1.48-to-1 ratio on the NYSE and for a 2.54-to-1 ratio on the Nasdaq.

The S&P index recorded 29 new 52-week highs and one new low, while the Nasdaq recorded 26 new highs and 426 new lows.