Stocks were muted on Monday as market participants sold shares of outperforming technology stocks to start the week. The Dow Jones Industrial Average dipped to close at a negative flatline, and the S&P 500 and Nasdaq Composite lost about 0.5% and 1.2%, respectively.
Here's how the market settled on Monday:
S&P 500 Index (NYSE: SPY): -0.45% or -19.51 points to 4,328.82
Dow Jones Industrial Average (NYSE: DIA): -0.04% or -12.72 points to 33,714.71
Nasdaq Composite Index (NASDAQ: QQQ): -1.16% or -156.74 points to 13,335.78
A sell-off in technology names contributed to the S&P 500's and Nasdaq's declines Monday, with names like Nvidia (NASDAQ: NVDA), Alphabet (NASDAQ: GOOG) and Tesla (NASDAQ: TSLA) all trading lower. The latter two also received high-profile downgrades on Monday.
UBS analyst Lloyd Walmsley downgraded Alphabet to Neutral from Buy, citing several risk factors for the tech giant's future revenue growth amid new search competition from Microsoft (NASDAQ: MSFT) and a better risk/reward skew towards Amazon (NASDAQ: AMZN) and Meta Platforms (NASDAQ: META), among other factors. Walmsley, however, increased the firm's price target on Alphabet to $132 a share from $123.
"Our bias is to see [generative AI] as a friend over the long term given that GOOG has substantial first party data and consumer applications that can leverage GenAI," Walmsley wrote. "We see three key risks, however, in the medium term: (1) competition from new search-like experiences from incumbents (Bing) and new entrants, (2) increasing capital intensity that could pressure margins, and (3) potential disruption to monetization as Google figures out the balance between content and ads in the [search engine results page]."
Separately, Goldman analyst Mark Delaney downgraded Tesla to Neutral from Buy, citing the electric carmakers explosive surge in shares so far this year amid a more challenging price environment for its vehicles; the stock has almost doubled in 2023 and has risen 38% in June alone.
"While the primary reason for the change in our view is that we think the market is now giving the stock more credit for its longer-term opportunities, we are also cognizant of the difficult pricing environment for new vehicles that we think will continue to weigh on Tesla's automotive non-GAAP gross margin this year," Delaney wrote in a Sunday note.
Technology shares have rebounded this year as investors bet on the emerging artificial intelligence market that includes both hardware and software companies, as well as positive sentiment towards the Federal Reserve as policymakers start to pause interest rate hikes. The pullback can be a sign of a healthy market.
Market participants are also trading cautiously ahead of more consumer data this week, which the Fed said will majorly guide the central bank on its future interest rate decisions. Fed Chair Jerome Powell is also set to speak later this week, offering more clues for the Fed's upcoming policy decision in July.
In news for Monday, PacWest (NASDAQ: PACW) announced a $3.5 billion sale of loans to alternative investment manager Ares Management as the regional bank attempts to boost liquidity following the bank sector turmoil from the collapse of Silicon Valley Bank back in March.
IBM (NYSE: IBM) shares rose Monday after the company announced plans to purchase IT software management company Apptio for $4.6 billion from Vista Equity Partners. IBM said the acquisition is an extension of its investment in AI and IT automation that will enable it to build on its application management products.
Shares of Pfizer (NYSE: PFE) fell on Monday after the pharmaceutical giant said it will halt the development of its experimental obesity and diabetes pill lotiglipron. The company cited elevated liver enzymes, which could lead to liver damage, in clinical trial participants who took the drug once per day.
Looking ahead, market participants will react to fresh housing market, inflation and consumer confidence data due out Tuesday morning.