* Declines in major tech-related companies put pressure on Nasdaq, S&P 500
* Walmart shifts as lukewarm outlook eclipses optimistic fourth-quarter sales
* Facebook stock slips in Australia news outage (adds market at 4pm)
NEW YORK, Feb. 18 (Reuters) – Stocks on Wall Street fell Thursday as investors shifted from the big tech names, while an unexpected surge in weekly unemployment claims in the US pointed to a fragile recovery in the labor market.
Shares of Apple Inc, Microsoft Corp, Tesla Inc and Alphabet Inc fell between 0.5% and 1.2%, weighing both the benchmark S&P 500 and the tech-heavy Nasdaq.
Shares of Facebook Inc fell as Wall Street assessed the broader ramifications of its attempt to block all news content in Australia.
Unofficially, the Dow Jones Industrial Average fell 118.7 points, or 0.38%, to 31,494.32, the S&P 500 lost 17.3 points, or 0.44%, to 3,914.03 and the Nasdaq Composite dropped 100.14 points, or 0.72%, to 13,865.36.
Strong earnings, advances in vaccine rollouts, and hopes for a $ 1.9 trillion federal stimulus package helped US stock indices hit record highs again early in the week.
But the months-long rally suggests stocks are now on high valuations, said Jason Pride, chief investment officer for private equity at Glenmede in Philadelphia.
“We are still in a cautiously optimistic environment for the market as a whole,” said Pride, citing two reasons.
“We’re getting a vaccine-induced economic recovery, that’s No. 1. The flip side of that story is that the markets have largely priced in that and pushed themselves into overvalued territory. Markets will struggle with that, ”he said.
Concerns about rising inflation expectations have prompted investors to earn gains on high-valued stocks in the technology and communications services sectors of the S&P 500, which have laid the foundation for a 76% rise in the S&P 500 since the March 2020 low.
Peter Essele, head of portfolio management at Commonwealth Financial Network in Boston, said there is a lot of irrational exuberance built into stock prices this year.
“We started to enter an environment where risk was re-factor, and inflation risk in particular,” he said. “Now the question is whether the fundamentals will match the current price level.”
A Labor Department report found that the state’s initial claims for unemployment benefits rose to 861,000 last week from 848,000 the week before, in part due to possible claims related to the temporary closure of auto factories due to a global shortage of semiconductor chips.
Of the 11 major S&P 500 sectors, only utilities and consumer cyclical growth, while consumer goods traded near break-even.
Walmart Inc slumped after the world’s largest retailer missed quarterly earnings estimates and forecast a low single digit increase in net sales in fiscal 2022.
‘We get mixed results. Strong retail sales, then crappy claims. We will likely see that for the rest of this quarter, ”said Jack Ablin, chief investment officer at Cresset Capital Management in Chicago.
“Even the Walmart story wasn’t that bad at first glance; they are going to invest more, ”Ablin said.
Walmart has invested heavily in online advertising and healthcare over the past year, leveraging pandemic-led sales momentum to diversify beyond the physical retail industry.
Marriott International Inc rose after reporting a quarterly loss as hotel chain bookings declined due to travel restrictions caused by pandemics.
Reporting by Herbert Lash; additional reporting by Devik Jain and Shreyashi Sanyal in Bengaluru; Edited by Saumyadeb Chakrabarty, Anil D’Silva and Dan Grebler