Stocks came off session lows as blue chips gained traction amid concern over how a Chinese ban on Apple Inc.’s iPhone could impact the big tech, the industry that has driven this year’s market rally.

The S&P 500 trimmed losses by more than half, led by an advance in defensive groups like utilities and health care. The Dow Jones Industrial Average rose. The Nasdaq 100 underperformed as Apple slid about 6.5 per cent in two days, wiping out US$190 billion in value. The company’s suppliers such as Qualcomm Inc. and Micron Technology Inc. also fell. Small caps were under pressure, with the Russell 2000 breaching a key technical level.

“We expect market choppiness to persist near term,” said Keith Lerner, co-chief investment officer at Truist Advisory Services. “September, like August, has tended to be a more challenging month, and there remains a dearth of obvious near-term upside catalysts as stocks continue to digest the big year-to-date gains.”

Tech shares have soared in 2023 amid the artificial intelligence frenzy and speculation that the Federal Reserve is getting closer to wrapping up its interest-rate hikes. The nearly 40 per cent run-up in the Nasdaq 100 suggests that valuations look stretched, according to some metrics, with the industry ripe for a correction.

Active managers’ holdings last month skewed defensive, according to data compiled by Bank of America Corp. Hedge funds and active long-only funds have upped their exposure to utilities stocks relative to historical averages. Active equity exposure to “high beta stocks remains well below average,” the BofA strategists said.

ECONOMY, FEDSPEAK

Traders also kept a close eye on the latest economic data, with solid jobless claims figures reinforcing the case for the Fed to keep rates elevated.

After climbing in the immediate aftermath of the report, two-year US yields fell below 5 per cent. The dollar saw a small gain after hitting an almost six-month high earlier this week.

“A solid round of employment data that reinforces the perception that the jobs market will remain resilient for the time being,” said Ian Lyngen at BMO Capital Markets. “From here, the market will remain wary of corporate-hedging related flows as they have been the biggest driver of price action in US rates thus far in September.”

Fed Bank of New York President John Williams said US monetary policy is “in a good place,” but officials will need to parse through data to decide on how to proceed on interest rates. 

The euro retreated as the region barely grew in the second quarter. The onshore yuan slipped to a 16-year low, as pessimism grew toward China’s economy. Emerging-market currencies came within a whisker of erasing all of this year’s gains. Oil dropped after a nine-session rally propelled futures into overbought territory. 

Corporate Highlights

• Boeing Co. fell after warning that deliveries of its cash-cow 737 jetliner will come in at the low end of its targeted range this year as a recently discovered supplier glitch crimps output.
• General Motors Co. made a counteroffer to the United Auto Workers union, proposing a total 16 per cent pay raise for the top wage earners in its plants and a 56 per cent hike for newer employees who make less. UAW President Shawn Fain reacted quickly saying the proposal is “insulting.”
• Ford Motor Co. said it raised the pay of 8,000 US hourly workers represented by the United Auto Workers union just a week before its union contract expires.
• Dell Technologies Inc. dropped after Barclays Plc downgraded the personal-computer company to underweight.
• C3.ai Inc. sank after giving a lackluster sales forecast and said profitability will take longer than expected, fueling anxiety the software company is struggling to capitalize on enthusiasm for artificial intelligence.
• BlackBerry Ltd. slid after the company cut its second-quarter revenue guidance to below the average of analyst estimates.
• Walmart Inc. rose on news the company has lowered its starting pay for some new hires as part of a revamped wage structure that took effect in July.
• McDonald’s Corp. rose after Wells Fargo upgraded the fast-food chain to overweight, expecting the company to “stand tall” as quick-service restaurant trends slow.

Key events this week:

• Japan GDP, Friday
• Germany CPI, Friday
• US wholesale inventories, consumer credit, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 fell 0.3 per cent as of 4 p.m. New York time
• The Nasdaq 100 fell 0.7 per cent
• The Dow Jones Industrial Average rose 0.2 per cent
• The MSCI World index fell 0.4 per cent

Currencies

• The Bloomberg Dollar Spot Index rose 0.2 per cent
• The euro fell 0.3 per cent to US$1.0697
• The British pound fell 0.3 per cent to US$1.2473
• The Japanese yen rose 0.3 per cent to 147.20 per dollar

Cryptocurrencies

• Bitcoin rose 0.8 per cent to US$25,878
• Ether rose 0.6 per cent to US$1,637.17

Bonds

• The yield on 10-year Treasuries declined three basis points to 4.25 per cent
• Germany’s 10-year yield declined four basis points to 2.61 per cent
• Britain’s 10-year yield declined eight basis points to 4.45 per cent

Commodities

• West Texas Intermediate crude fell 0.6 per cent to US$87 a barrel
• Gold futures were little changed