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S&P 500 Closes Lower, But Tech Shows Signs of Life on Dip-Buying

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By Yasin Ebrahim

Investing.com – The S&P 500 closed lower Tuesday, but tech stocks showed signs of life as investors swooped in to take advantage of the recent rout, keeping a lid on further downside in the broader market.

The S&P 500 closed down 0.87% but had been down about 2% at the lows of the day. the Dow Jones Industrial Average fell 1.36%, or 473 points, and the Nasdaq Composite was down 0.09%, but had been down more than 2%.

Beaten-down tech stocks popped up on investors' shopping lists, pushing the "Fab 5" off the lows of the day.

Google-parent Alphabet (NASDAQ:GOOGL), Apple (NASDAQ:AAPL), Facebook (NASDAQ:FB) Amazon.com (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT) traded well above their session lows.

Tesla (NASDAQ:TSLA) was a drag on the tech-heavy Nasdaq, slipping more than 1% after reports that its April sales in China slumped 27%, according to a Bloomberg report, citing China's Passenger Car Association. The electric automaker also suspended plans to expand its gigafactory in Shanghai, China, amid rising US-China tensions.

But the dip-buying in these megacap stocks may not have staying power as frothy valuations remain a concern.

"The popular areas of the market like big tech and growth stocks reported strong quarterly earnings, but the reactions [in their stock prices] afterwards still wasn't enough [to sustain a move higher], partly because their valuations are pretty high," said George Cipolloni a portfolio manager of Penn Mutual Asset Management said in an interview with Investing.com on Tuesday.

The rally in cyclicals, meanwhile, took a breather as investors hit pause on the reopening trade.

Energy fell more than 2%, despite a rebound in oil prices as concerns about U.S. refiners cutting demand continue to linger following reports the country’s largest fuel pipeline, Colonial Pipeline, will not be fully operational for the rest of the week.

Segments of the pipeline are being "brought back online in a stepwise fashion... based on a number of factors with safety and compliance driving our operational decisions, and the goal of substantially restoring operational service by the end of the week,” Stifel said, citing company officials.

Industrials were dragged lower by airlines, with Alaska Air Group Inc (NYSE:ALK), American Airlines Group (NASDAQ:AAL) and United Airlines Holdings Inc (NASDAQ:UAL) closed down about 2%.

Still, market participants continue to back cyclicals against tech pointing to ongoing expectations for a robust recovery.

"If we do get a follow through with economic growth, healthy inflation, and slightly higher interest rates, I think all those factors are in their [value sector] favour," Cipolloni added.

On the earnings front, investors had to contend with the mixed quarterly results from corporates.

Palantir Technologies (NYSE:PLTR) jumped more than 9% after reporting first-quarter earnings that topped Wall Street expectations as revenue surged 49% in the quarter.

Virgin Galactic Holdings Inc (NYSE:SPCE) cut losses to close up 1% despite reporting wider first-quarter losses, and flagged wear-and-tear issues for its Eve mothership that could delay its next test flight, which was slated for this month.

Roblox (NYSE:RBLX) delivered first-quarter results that fell short of estimates but signs that gaming activity remains robust on the platform even as the economic reopening gathers pace sent its shares more than 21% higher.

On the pandemic front, the U.S. Federal Drug and Food Administration authorized the Pfizer-BioNTech vaccine for use in children aged 12 to 15.

Vaccinating children will allow states to resume in-person learning in schools, paving the way for a further reopening of the economy.

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