by Sinéad Carew and Bansari Mayur Kamdar

(Reuters) – The New York Stock Exchange ended sharply lower on Tuesday, under the effect of the decline in technology stocks, notably Apple, during a week marked by a range of economic data and by the hearing of the president of the American Federal Reserve (Fed), Jerome Powell, in front of parliamentarians.

The Dow Jones index fell 1.04%, or 404.64 points, to 38,585.19 points.

The broader S&P-500 lost 52.3 points, or 1.02%, to 5,078.65 points.

The Nasdaq Composite fell 267.92 points (1.65%) to 15,939.59 points.

Data published during the day paint a mixed economic picture: if growth in activity in the American services sector slowed in February, against a backdrop of falling unemployment, the new orders index reached a six-month high , suggesting underlying strength in the sector.

A separate report showed a larger-than-expected drop in new orders for U.S. manufacturing goods in January.

After driving Wall Street to records earlier this year, the hype around artificial intelligence (AI) faded this week, giving way to questions about the Fed’s monetary policy after data highlighting persistent inflation in February dampened hopes of an imminent rate cut.

Some analysts see today’s 1.2% decline in the technology sector as profit-taking following the sector’s recent gains and its 56% jump last year.

Two things could explain the risk aversion seen during the session, said Craig Fehr, chief investment officer at Edward Jones in St. Louis.

First, he noted, the 24% annual drop in iPhone sales in China over the first six weeks of the year, due to increased local competition, notably from Huawei. Apple lost 2.8%.

Secondly, he added, information from the Bloomberg agency according to which the American administration wants to block the efforts of Advanced Micro Devices to market an AI-powered chip specifically intended for the Chinese market, while Washington restricts increasingly exports of advanced technologies to China. Semiconductor maker stocks plunged.

Craig Fehr also pointed to a form of backlash after the S&P-500 reached a record high during the session on Monday before ending slightly lower. “It is reasonable, and even healthy, to take pauses (…) This market is catching its breath after significant gains,” he said.

Investors are awaiting the hearing of Fed President Jerome Powell before elected representatives of the US Congress on Wednesday and Thursday, to scrutinize potential clues on the central bank’s monetary policy.

Most traders anticipate a first rate cut in June.

Among the eleven major sectors of the S&P-500, eight ended the session in the red. Energy recorded the largest increase, with 0.7%.

Tesla fell 3.9% following a fire at its European gigafactory near Berlin where production was suspended.

Target jumped 12% after announcing an annual sales forecast well above expectations.

(Written by Jean Terzian)

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