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US services sector cools in February, ISM survey shows

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Target ( TGT ) forecasts FY comparable sales above estimates

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Apple ( AAPL ) drops after China iPhone sales plunge

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Indexes down: Dow 1.04%, S&P 1.14%, Nasdaq 1.88%

(Updates prices at 02:34 p.m. ET/ 1934 GMT)

By Sinéad Carew and Bansari Mayur Kamdar

March 5 (Reuters) - Wall Street stocks fell on Tuesday,

with weakness in megacap growth shares such as Apple Inc ( AAPL ) and the

chip sector weighing on the Nasdaq ahead of this week's slew of

economic data and remarks from Federal Reserve Chair Jerome

Powell.

Data showed U.S. services industry growth slowed in February

as employment declined, but a measure of new orders grew to a

six-month high, signaling underlying strength in the sector.

The Purchasing Managers Index report on Tuesday confirmed

continued economic growth despite 525 basis points worth of

interest rate hikes from the Fed since March 2022.

Another survey showed new orders for U.S.-manufactured goods

dropped more than expected in January.

A rally fueled by artificial intelligence fizzled out this

week as the focus turned to the next clues on the Fed's monetary

policy path after signs of sticky inflation in February dampened

hopes of early interest rate cuts.

"Markets are softer today with a bit more risk-off tone

overall," said Craig Fehr, head of investment strategy at Edward

Jones in St. Louis.

Two reports hurt tech stocks, Fehr said. A research report

showed iPhone sales in China fell 24% year-on-year in the first

six weeks of 2024 as Apple ( AAPL ) faced increased competition

from domestic rivals such as Huawei. Apple ( AAPL ) shares were

down 2.9% after the report.

A Bloomberg News report on Monday depressed the chip sector,

he added. Advanced Micro Devices ( AMD ) shares fell 1.3% on the

news that it has hit a roadblock in its efforts to sell an AI

chip tailored for the Chinese market as Washington cracks down

on advanced technology exports to Beijing.

Chip rivals fell in sympathy with the Philadelphia

semiconductor index, down 2.8%.

While technology, down 2.7%, led declines among

the S&P 500's major industry sectors on Tuesday, the sector was

still up roughly 10% so far in 2024 after rising 56% in 2023.

"A little bit of the weakness we're seeing in technology

today is a function of the strength we've seen," said Fehr.

"It's reasonable and even healthy to take some pit stops along

the way. This is market is to a degree, stopping for a breather

after what's been a very sharp run higher. "

The Dow Jones Industrial Average fell 406.15 points,

or 1.04%, to 38,583.68. The S&P 500 lost 58.51 points, or

1.14%, at 5,072.44 and the Nasdaq Composite dropped

304.48 points, or 1.88%, to 15,903.03.

The benchmark S&P 500 had hit a fresh intraday record

high on Monday before closing slightly lower in the run-up to

Powell's testimony before lawmakers on Wednesday and Thursday.

Investors are also waiting for clues about interest rate

policy from economic data, including the crucial non-farm

payrolls report, due out on Friday.

Traders see a 67.2% chance of the first rate cut this year

in June, as per CME Group's FedWatch tool.

Seven of the 11 major S&P 500 indexes declined while energy

, up 1% and consumer staples, up 0.6%, were the

biggest gainers.

Among megacap technology stocks, Tesla shares

dropped 4% after its European Gigafactory near Berlin halted

production following a suspected arson attack.

On the bright side, Target ( TGT ) shares jumped more than

12% after the big-ticket retailer forecast annual comparable

sales largely above estimates, betting on same-day services,

product launches and a new membership program to boost spending.

Microstrategy ( MSTR ) shed 15% after the bitcoin

development company announced a private offering for $600

million in convertible senior notes, with proceeds to be used to

buy bitcoin.

Declining issues outnumbered advancers on the NYSE by a

1.13-to-1 ratio; on Nasdaq, a 1.57-to-1 ratio favored decliners.

The S&P 500 posted 49 new 52-week highs and six new lows;

the Nasdaq Composite recorded 87 new highs and 99 new lows.