Nasdaq drops as FAANG growth worries persist

By Amy Caren Daniel

(Reuters) - The Nasdaq Composite fell more than 1 percent on Monday for the third straight session, as disappointing forecasts from a clutch of technology and internet companies fueled worries about the continued growth of the high-flying tech sector.

Gains by energy companies, as oil prices rose, and bank stocks ahead of the Federal Reserve meeting helped the benchmark S&P 500 cut its losses.

The technology index tumbled 1.65 percent, falling more than 1.5 percent for the third straight day as underwhelming results from the likes of Facebook and Netflix spooked investors about the prospects of a sector that has led the equity market to record highs.

The so-called FAANG group fell on Monday. Facebook dropped 4.3 percent and Netflix slid 4.6 percent. Amazon declined 1.2 percent and Alphabet dropped 1.5 percent despite both reporting healthy results.

Apple, which is due to report earnings on Tuesday after the bell, fell 0.6 percent.

"Investors are still trying to digest results from FAANG stocks last week, and trying to figure out if it's just another bump in the road or if something more meaningful is in play," said Cliff Hodge, director of investments for Cornerstone Wealth in Charlotte, North Carolina.

"People are worried these stocks won't hold up or will not continue to grow. They are looking at the big picture and wondering if we're getting later and later in the cycle and trying to decide if it's time to be more defensive."

Still, six of the 11 major S&P sectors were higher. The biggest boost to the market was from the energy sector's 0.63 percent gain as oil prices rose with investors remaining cautious over supply outlook.

At 11:29 a.m. EDT the Dow Jones Industrial Average was down 42.84 points, or 0.17 percent, at 25,408.22, the S&P 500 was down 9.45 points, or 0.34 percent, at 2,809.37 and the Nasdaq was down 82.14 points, or 1.06 percent, at 7,655.28.

Still, declining issues outnumbered advancers for a 1.06-to-1 ratio on the Nasdaq. Advancing issues outnumbered decliners for a 1.34-to-1 ratio on the NYSE.

Caterpillar's shares were up 0.5 percent, easing from higher gains before the bell when the heavy equipment maker reported a second-quarter profit that beat estimates and raised its full-year profit outlook.

AT&T rose 2.9 percent and led the telecoms sector 2.36 percent higher after Bank of America upgraded the wireless carrier's stock, according to CNBC.

Financial stocks gained 0.29 percent ahead of the Federal Reserve's meeting on Tuesday and Wednesday.

The Fed is expected to keep rates unchanged and reaffirm outlook for further rate hikes. The market has almost fully priced in a September hike and is leaning towards a further move before the end of the year.

American Express fell 2.6 percent after the Wall Street Journal reported the company raised currency conversion rates for its business clients without notifying them.

Tyson Foods dropped 6.6 percent after cutting its full-year profit forecast, saying uncertain trade policies and higher tariffs hurt domestic and export prices, specifically for chicken and pork.

The warning also weighed on the shares of Hormel Foods, Sanderson Farms and Pilgrim's Pride, which fell between 0.3 and 2.3 percent.

The S&P index recorded 13 new 52-week highs and two new lows, while the Nasdaq recorded 22 new highs and 64 new lows.

(Reporting by Amy Caren Daniel in Bengaluru; Editing by Shounak Dasgupta)