May 7 - Summary: Tech stocks underperformed a broader market boosted by Fed Chief Janet Yellen as Twitter continues to look for a bottom and investors make room for Alibaba's upcoming IPO; Tesla results lack enough juice. Conway G. Gittens reports.
The pressure on tech just won't let up. The tech-heavy Nasdaq slumped to a three-week closing low, but the broader market as seen by the Dow and the S&P 500 moved higher. Earnings have been the problem for tech. But after the close, sweet results from King Digital. Revenues and earnings at the maker of Candy Crush Saga - exceeding forecasts. Tesla also out with after-the-bell results. Excluding items, sales and profits topped estimates, but not by a wide enough margin to please investors. Call it the Alibaba effect. The Chinese e-commerce giant is not even publicly traded yet in what could be Wall Street's biggest IPO ever and investors of its competitors are shaking in their boots. Take a look at two names: Amazon and eBay were both down on the day. And even Yahoo, which has a 24 percent stake in Alibaba, fell roughly 7 percent - one of the top losers in the S&P 500. Other tech stocks may be impacted in a different way. Investors may be selling those to make room in the portfolios for Alibaba - so Facebook, Netflix and Google were also down. Concerns about Twitter continue to batter that stock. One day after early investors were permitted to sell, shares touched 30 bucks, moving ever closer to that $26 IPO price. The sell-off in high flying tech and biotech names has been painful, but there's more to come, warns D.A. Davidson Chief Investment Strategist Fred Dickson. SOUNDBITE: FRED DICKSON, CHIEF INVESTMENT STRATEGIST, D.A. DAVIDSON (ENGLISH) SAYING: "The questions I get is 'where's the bottom for some of these really high profile social media stocks?' and probably we haven't hit it yet, but we should be getting close. A number of them look oversold but until investors become convinced that their economics come into line with valuation reality - they may go lower." And it's not just tech. Whole Foods cut its outlook for the year as competitors step up. With a 19 percent drop, the high-end grocer was by far the worst stock in the S&P 500. Federal Reserve Chair Janet Yellen up on Capitol Hill for day one of a two-day chat with lawmakers. In her testimony, she warns a housing slowdown and geopolitical tensions are top risks to the Fed's economic outlook. And the economy still needs lots of support - i.e. low interest rates. In Europe, Russian President Vladimir Putin urged pro-Russian separatists in Ukraine to call off a vote on succession. As for the markets, they were mixed thanks to a big drop in automaker Fiat Chrysler.