Stock tumble sends tech-heavy Nasdaq into correction territory; Amazon whacked by Trump tweet

U.S. stocks fell sharply Monday, with the Nasdaq turning lower for 2018 and dropping into correction territory, in just the latest instance of heavy intraday volatility.

The technology sector extended its recent decline, with large-capitalization internet and tech shares leading the market lower. Concerns about trade policy also drove selling and indicated that the volatility that marked the final weeks of the first quarter hadn’t fully played out.

Read:Why stock-market investors should welcome the arrival of April

What are the main benchmarks doing?

The Dow Jones Industrial Average DJIA, -2.07% fell 472 points, or 2%, to 23,627. The S&P 500 SPX, -2.23% lost 62 points to 2,579, a decline of 2.3%. The S&P was at risk of closing below its 200-day moving average — a key level for gauging long-term momentum — for the first time since June 2016.

The Nasdaq Composite Index COMP, -2.43% was down 193 points, or 2.7%, to 6,870. With the tumble in the Nasdaq, it is now down 0.5% for 2018, with all of its year-to-date gains having been erased. At current levels, it is also set to close in correction territory for the first time in about two years, having dropped at least 10% from a recent peak.

The day’s decline was broad, with all 11 primary S&P 500 sectors down on the day and 10 of them losing more than 1%. However, the technology sector and consumer-discretionary stocks were the biggest drags on the day. Weakness in shares of Amazon.com, which was in the line of fire from President Trump, drove the discretionary decline.

Thursday marked the end of the month and quarter for major indexes. Markets were closed in observance of Good Friday. The Dow Jones Industrial Average and the S&P 500 index broke a streak of quarterly gains and, along with the Nasdaq, logged steep declines for March. Historically, April has been a strong month for stocks, including the strongest of the year for the Dow.

Read:What struggled in the first quarter? Stocks, bonds, basically everything

What’s driving markets

Trade policy continued to be in the forefront in the minds of investors. China announced tariffs on about 130 U.S. goods, including a 25% penalty slapped on U.S. pork and 15% on fruit. The news means China has made good on its threat to retaliate against the Trump administration’s tariffs on Chinese steel and aluminum imports.

Read:Steel, cocoa among first-quarter gainers, but coal, sugar take biggest hits

Technology and internet stocks have also remained in focus, as the sector—still one of the stronger performing of the year—has undergone heavy volatility. Facebook Inc. FB, -2.23%Tesla Inc. TSLA, -3.96% and Amazon.com Inc. AMZN, -4.36% in particular have all seen steep moves of late.

Trump increased his attack on Amazon’s business practices on Saturday, tweeting how the U.S. Postal Service loses money each time it delivers an Amazon package, a statement that others have contradicted. Amazon fell 5.3% on Monday; the stock is down more than 8.6% over the past month.

What data are in focus?

The IHS Markit manufacturing purchasing managers index hit a three-year high of 55.6 in March, up from 55.3. The ISM manufacturing report for the same month came in at 59.3, compared with a previous monthly reading of 60.8. A reading of 50 or above indicates improving conditions.

A reading on construction spending, meanwhile, inched up 0.1% in February to a seasonally adjusted annual rate of $1.27 trillion, the Commerce Department reported Monday. Economists polled by MarketWatch had expected growth of 0.3%, compared with an unchanged reading in January.

Data highlights for the rest of week include Friday’s March payrolls report, where some economists expect hiring will slow down.

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Check out:MarketWatch’s Economic Calendar

What are strategists saying?

“Today’s weakness has everything to do with China’s announced tariffs. Even though they were quite small, there’s a fear that this could escalate. We don’t know if this could be the end as far as retaliation goes, but it seems like the trade issue is escalating into bite and not just bark,” said Hank Smith, chief investment officer at Haverford Trust Co.

Smith also pointed to the weakness in tech and internet stocks as a main focus for investors. “You need to keep in mind that these stocks have had tremendous upward moves over the past year, but whenever the specter of Washington shines on an industry, you typically don’t get good performance. That’s what we’re seeing right now.”

Which stocks are in focus?

Tesla fell 5.3% after the National Transportation Safety Board said it was “unhappy” that the electric-car maker revealed detailed information about a fatal California crash. Meanwhile, Tesla CEO Elon Musk sent out a series of April Fool’s tweets about the company going bankrupt. That is after shares sank around 22% in March. Despite the recent weakness, one analyst said the “perfect storm” of bad news had created a buying opportunity. The stock is down more than 20% thus far this year.

CEOs of public companies shouldn't be putting out tweets like this Elon. Let's get real here, stay focused on what you need to be doing for shareholders.
— Brian Sozzi (@BrianSozzi) April 2, 2018

Humana Inc.HUM, +4.53% rose 4.6% after The Wall Street Journal late-Thursday reported that Walmart Inc.WMT, -3.68%was in early talks to buy the company. Walmart, a Dow component, was down 3.3%.

Alkermes PLCALKS, -23.31% sank 21% after the company received a “refusal to file” letter from the Food and Drug Administration regarding its new drug application for ALKS 5461, a treatment for major depressive disorder. Alkermes management said the FDA hadn’t raised concerns before, and that they weren’t clear on what those objections even were.

Among the notable decliners of the tech sector, Facebook Inc. fell 3% while Google-parent Alphabet Inc. GOOGL, -3.00% was down 3.5%. Microsoft Corp. MSFT, -2.59% lost 3.1% and Apple Inc. AAPL, -1.11% was down 1.4%.

Netflix Inc. NFLX, -4.18% , a consumer-discretionary stock that often trades on technology trends, sank 4.1%.