By Shreyashi Sanyal
(Reuters) – The Nasdaq sank more than 1 percent on Wednesday, with social media companies leading technology stocks lower as Twitter and Facebook executives faced U.S. Congress over what lawmakers see as a failure to combat foreign efforts to influence U.S. politics.
The broader market was also weighed by a drop in energy stocks as oil prices weakened and fears over the likelihood of the United States slapping new tariffs on Chinese goods as early as this week.
Twitter (N:TWTR) dropped 5.4 percent and Facebook (O:FB) fell 1.8 percent as their top executives faced lawmakers.
Alphabet (O:GOOGL), whose offer to send its chief legal officer to Congress rather than its chief executive officer was declined, slid 2.6 percent. Snapchat-parent Snap Inc (N:SNAP) was down 4.4 percent.
"The testimony is going to affect the tech sector and there are some concerns about how government and policies could pose as a threat to these growth stocks," said Ryan Nauman, market strategist at Informa Financial Intelligence in Zephyr Cove, Nevada.
"But it won't have a huge effect on the overall market today, will likely only hurt the sector."
The technology sector (SPLRCT) tumbled 1.81 percent, the most among the 11 S&P sectors. But seven of the 11 sectors were higher, led by the consumer staples sector's (SPLRCS) 0.78 percent gain as food packaging companies rose.
With concerns over trade simmering, Commerce Department data showed that the U.S. trade deficit hit a five-month high in July, suggesting the Trump administration's protectionist policy was so far not having an impact.
The data comes as consultations on a U.S. proposal to impose tariffs on $200 billion more in Chinese imports ends on Sept. 6, with Trump ready to impose these tariffs after that, according to Bloomberg. The United States and Canada will also resume talks on the North American Free Trade Agreement.
"The elephant in the room is definitely the $200 billion potential tariffs on Chinese imports because these tariffs have a wider range of risks and investors are more concerned about that then what is happening at Capitol Hill," Nauman said.
At 11:31 a.m. ET the Dow Jones Industrial Average (DJI) was down 43.09 points, or 0.17 percent, at 25,909.39, the S&P 500 (SPX) was down 16.66 points, or 0.58 percent, at 2,880.06 and the Nasdaq Composite (IXIC) was down 114.24 points, or 1.41 percent, at 7,977.01.
The energy sector (SPNY) dropped 1.04 percent. Crude prices fell after supply concerns eased as a tropical storm weakened and moved away from oil-producing areas in the U.S. Gulf and concerns about weakening global demand surfaced. [O/R]
Halliburton (N:HAL) fell 5 percent, after the oilfield services provider warned third-quarter earnings could be hurt from moderating activity in the Permian Basin and a slower-than-expected ramp-up of new Middle East contracts.
Rival Schlumberger (N:SLB) dropped 2.4 percent and Baker Hughes (N:BHGE), the oilfield services arm of General Electric (N:GE), fell 2.7 percent.
GE was down 1 percent and was hit as UBS cut its price target on the stock on concerns over the company's power business.
Declining issues outnumbered advancers for a 1.39-to-1 ratio on the NYSE and a 2.02-to-1 ratio on the Nasdaq.
The S&P index recorded 34 new 52-week highs and eight new lows, while the Nasdaq recorded 66 new highs and 35 new lows.