Tech Stocks Are Getting Hammered. Here’s the Logic Behind the Rout. – Barron’s

The reason is simple. Old-economy stocks tend to be economically sensitive, and with the global economy emerging from its Covid-coma, cyclical businesses are booming like Zoom did amid global lockdown.

Investors are only now catching on to that fact. They’re playing catch-up, and that means they need to sell tech to buy old economy. Selling, though, begets selling, and that can turn a run-of-the-mill pullback into something more painful.

Consider Cathie Wood’s ARK Innovation ETF, home to the highest growth of the high growth tech sector. It’s down 14% in May alone, has fallen in nine of the past 10 trading sessions. Fifty-three of Wood’s 58 stock holdings are down over that span.

One of Wood’s winners over the past month is heavy duty truck maker Paccar, an old-fashioned cyclical stock.

Sometimes, it’s just a case of being in the wrong place at the wrong time.

—Al Root

*** In this week’s Barron’s Streetwise podcast, how Hubert Joly brought Best Buy back from the brink. Plus, UBS strategist Evan Brown on rising inflation. Listen here.

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FDA Clears the Way for Pfizer-BioNTech’s Vaccine in Adolescents

Pfizer’s Covid-19 vaccine with BioNTech took another step forward late Monday when the Food and Drug Administration cleared it for use in 12 to 15-year-olds just in time for summer camps and school in the fall.

• Until now, the vaccine was only approved for people over age 16. Acting FDA Commissioner Dr. Janet Woodcock said being able to vaccinate younger children brings us closer to “a sense of normalcy and to ending the pandemic.”
• The European Union is buying up to 1.8 billion doses of Pfizer-BioNTech’s vaccine through 2023 and has stopped ordering AstraZeneca doses beyond June.
• Novavax, a Maryland company working on its own Covid vaccine, will not seek approval for it until at least July, the Washington Post reported. It reported a first quarter net loss of $223 million, or $3.05 a share, compared to a net loss of 58 cents a share last year.

What’s Next: An advisory group to the Centers for Disease Control and Prevention will meet Wednesday to decide if Pfizer’s vaccine should be used for adolescents, before the CDC makes its own formal recommendation. Moderna and Johnson & Johnson are also testing their vaccines among children under 18.

—Janet H. Cho and Liz Moyer

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Biden Announces Initiatives to Boost Employment

President Joe Biden announced new measures to help the 22 million Americans who lost their jobs during the pandemic “through no fault of their own,” including child care subsidies, aid to rehire state and local employees, and tax credits for employers to retain workers and encourage them to get vaccinated.

• Countering criticism that extra federal unemployment benefits are to blame for an unexpectedly weak April jobs report, Biden pointed to 1.5 million jobs created during his first 100 days in office and economic growth of 6.4%. “I never said it would be simple, easy, immediate or perfectly steady,” he said.
• Since mid-April, Covid-19 cases have declined 40%. Nearly 44% of adults are fully vaccinated, 16,000 checks have gone out to restaurants hurt by the pandemic, and 800,000 families are getting child care subsidies, Biden said.
• People collecting unemployment who are offered suitable jobs must take them or lose their unemployment benefits, Biden said. “Americans want to work,” he said. “A job’s a lot more than a paycheck. It’s about your dignity, your place in the community.”
• Chipotle Mexican Grill will raise average wages to $15 an hour by the end of June as it seeks to hire 20,000 workers. It is also offering referral bonuses of $200 for employees who recommend crew members and $750 for “apprentices” or general managers.

What’s Next: The Biden administration on Monday also released $350 billion to help state, local and tribal governments recover pandemic costs, from water, sewer and broadband to ventilation and vaccination programs, and to rehire employees they had to cut last year.

—Janet H. Cho

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FBI Says DarkSide Behind Ransomware Attack on Colonial Pipeline

The ransomware attack that shut down Colonial Pipeline’s 5,500-mile system on Friday came from DarkSide, a criminal organization believed to operate out of Eastern Europe, the Federal Bureau of Investigation confirmed Monday.

• DarkSide said in a statement posted online that “our goal is to make money” and said it had not acted on behalf of a foreign government. “We are apolitical,” the group said, according to The Wall Street Journal. DarkSide’s statement did not directly address the Colonial Pipeline, the Journal said.
• While U.S. intelligence officials have not said Russia was involved, President Biden said Monday, “there is evidence that the actors’ ransomware is in Russia. They have some responsibility to deal with this.”
• Colonial Pipeline, which carries 45% of the gasoline, diesel, jet fuel and heating oil used on the East Coast, said it has already restored service to some of its smaller lateral lines and hopes to “substantially” resume its main lines by the end of the week.
• An extended shutdown would most affect Georgia, North Carolina, South Carolina and Tennessee, said Patrick De Haan, head of petroleum analysis at GasBuddy. Gasoline prices averaged $2.97 a gallon on Monday afternoon.

What’s Next: Biden said Monday that his administration was working to “disrupt and prosecute ransomware criminals,” calling ransomware a growing problem that requires a global response. He said infrastructure investment would help safeguard critical systems from debilitating cyberattacks.

—Janet H. Cho

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Facebook Is Urged by Attorneys General to Drop Instagram Service for Children

A bipartisan group of attorneys general from 44 states and territories wrote a letter to Facebook urging the company to abandon plans for an Instagram service for children.

• “Use of social media can be detrimental to the health and well-being of children, who are not equipped to navigate the challenges of having a social media account,” the attorneys general wrote. “Facebook has historically failed to protect the welfare of children on its platforms.”
• Instagram currently doesn’t allow children under the age of 13 to set up an Instagram account. Tweens can get around this restriction by lying about their age. Though it’s against the site’s rules, it’s difficult to enforce.
• A Facebook spokesman told The Wall Street Journal that the social media giant would work with regulators as it develops the idea. “We want to improve this situation by delivering experiences that give parents visibility and control over what their kids are doing,” the spokesman added.
• Separately, videogame company Roblox, a major player in children’s entertainment, said Monday its online platform saw huge engagement and user growth during the first quarter of 2021. The stock was up almost 4% in after-hours trading.

What’s Next: Facebook hasn’t said when it would launch the service.

—Connor Smith

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Alarm Raised About India’s Covid Variant as Pandemic Keeps Spreading in Country

The World Health Organization has classified a Covid-19 variant detected in India as one of “concern at a global level,” based on studies showing increased risks of transmissibility. Infections and deaths remained near their record highs in India on Monday.

• The Indian variant, known as B.1.617, is the fourth variant identified in the category requiring heightened tracking, after the British, South African and Brazilian ones. It has already spread to other countries.
• India’s daily coronavirus cases rose by 329,942 on Tuesday, keeping the seven-day average at a record high. The pandemic has killed 250,000 people to date in the country, and India now accounts for one in every three coronavirus deaths worldwide, according to a Reuters count.
• The impact of the pandemic in India has been magnified by a dearth of oxygen cylinders and other medical gear, with hospitals both overwhelmed and unable to provide proper care to Covid-infected patients. Governments around the world have begun in recent weeks to send equipment to the country.
• Cases of mucormycosis, a rare black fungus that invades the brain, with a high mortality rate, have appeared among vulnerable Covid-19 patients in India, given more chance to spread due to the current situation in hospitals.

What’s Next: More information about the Indian variant is due to be released this week, the WHO said. But many countries, such as Canada, Australia, the U.K. and Italy, have already banned entry to visitors from India.

—Pierre Briançon

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Congrats to the winners of the April virtual stock exchange game! Be sure to join this month’s Barron’s Daily virtual stock exchange challenge and show us your stuff.

Each month, we’ll start a new challenge and invite newsletter readers—you!—to build a portfolio using virtual money and compete against the Barron’s and MarketWatch community.

Everyone will start with the same amount and can trade as often or as little as they choose. We’ll track the leaders and, at the end of the challenge, the winner whose portfolio has the most value will be announced in The Barron’s Daily newsletter.

Are you ready to compete? Join the challenge and pick your stocks here.

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Corrections & Amplifications
Exxon Mobil is in the Dow Jones Industrial Average. An earlier version of this article said it’s part of the benchmark.

—Newsletter edited by Stacy Ozol, Mary Romano, Liz Moyer, Ben Levisohn