Investors take profits in high-flying Nasdaq names
NEW YORK Oct 8 (Reuters) - Shares of some of the Nasdaq's strongest performers this year tumbled on Tuesday as investors took profits in high-flying names amid growing uncertainty over the impasse in Washington.
Companies in the technology sector were the hardest hit, with Yahoo Inc, TripAdvisor Inc and Netflix Inc all among the day's biggest losers, but investor favorite Tesla Motor Inc also dropped in heavy volume. The Nasdaq Composite Index was trading down 1.3 percent midday.
Investor unease has grown amid the ongoing partial shutdown of the federal government, which has shown little sign of a resolution. Market participants have also fretted about the upcoming debt ceiling negotiation, which could result in a default on U.S. debt if no deal is reached.
"Given all the uncertainty and anxiety about what could happen with the debt ceiling, investors want to take profits, and these are the ones that have seen some of the biggest gains this year," said Donald Selkin, chief market strategist at National Securities in New York.
Investors have favored companies like Yahoo and TripAdvisor this year thanks to their expanding user bases and profit growth that eclipsed the broader market. The names "have been real leaders this year, making all-time highs, so they're the ones that are the most vulnerable," said Selkin, who helps oversee about $3 billion in assets.
Shares of Facebook Inc fell 4.4 percent to $48.27 in its biggest daily decline since Feb. 4. Still, the social networking company remains 81 percent higher on the year. Electric carmaker Tesla, which has soared almost 420 percent in 2013, fell 3.9 percent to $175.90.
Yahoo was the S&P 500's biggest percentage decliner, losing 5.2 percent to $32.40, followed by TripAdvisor, which lost 4.9 percent to $72.08. Both companies have gained more than 60 percent this year.
The strong performance of these companies has raised concerns that they are wildly overbought. Tesla's P/E ratio is 112.56, compared to the 7.94 ratio of its peers. Netflix has a P/E ratio of 106.64, many times the 15.73 ratio of its peers.
"Everyone thinks a deal will be done and we will... avert a default, but the longer it goes the possibility they won't get anything done in time increases and traders probably don't want to be holding the highest P/E stocks," said Scott Armiger, Portfolio Manager at Christiana Trust in Greenville, Delaware.
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