US STOCKS-Stocks Slip Due to Stimulus, Infrastructure Costs Scare Investors

* Shares drop significantly at the end of the session

* Small caps slide 3.5% as energy and financials drop

* GameStop falls ahead of quarterly results

* Indices falling: Dow 0.94%, S&P 500 0.76%, Nasdaq 1.12% (adds market details after close, analyst comment)

By Herbert Lash

NEW YORK, March 23 (Reuters) – U.S. stocks fell on Tuesday as concerns over the cost of infrastructure spending and potential tax hikes to pay President Joe’s $ 1.9 trillion relief bill Biden weighed on investors who also feared a further decline in the market.

Remarks by Treasury Secretary Janet Yellen that the US economy remains in crisis due to the pandemic as she defended the development of plans for future tax increases to pay for new public investments have put investors on alert.

Yellen spoke at a House Financial Services Committee hearing where Federal Reserve Chairman Jerome Powell also addressed the committee.

Discussions over the government’s infrastructure plans have baffled investors who fear the stock market is trading at high valuations, said Rick Meckler, a partner at Cherry Lane Investments in New Vernon, New Jersey.

“There is a bit of concern going out ahead of a potential sale that might be on the horizon,” Meckler said. “Any sense that this might be on the horizon prompts people to pull the trigger on those downward moves pretty quickly.”

The shares were trading near the breakeven point in the flip-flop trade before falling sharply about 45 minutes before the close.

Powell told U.S. lawmakers that a next round of post-pandemic price hikes would not fuel a persistent destructive surge in inflation – fears that had recently sparked higher yields and caused tech stocks to sell off.

Oil prices which fell more than 3% on fears that further brakes on the pandemic and slow vaccine deployments in Europe would slow the recovery in demand have helped push down the energy sector .

Lower yields on 10-year US Treasuries from 14-month highs last week pushed down this year’s outperformance in the financial and energy sectors.

The story continues

Conversely, tech-related stocks that had recently fallen sharply due to the rate hike had recovered somewhat as yields eased, said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Va. .

“A lot of these (tech) stocks have taken 10% to 20% corrections and interest rates have retreated a bit,” Tuz said. “The money seems to be going in and out of the groups that have been doing extremely well over the past three months, especially finance and energy.”

The benchmark S&P 500 and blue chip Dow Jones rallied around 80% from their pandemic lows a year ago, while the high tech Nasdaq more than doubled in value .

Small-cap stocks, which had outperformed this year, as well as financials, energy and international stocks, fell 3.5% in the largest single-day decline since February 25.

The CBOE volatility index fell to its lowest level in 13 months before jumping around 11% on the day. Wall Street’s so-called fear gauge is still hovering near pandemic lows.

The Dow Jones Industrial Average fell 308.05 points, or 0.94%, to 32,423.15 and the S&P 500 lost 30.07 points, or 0.76%, to 3,910.52. The Nasdaq Composite lost 149.85 points, or 1.12%, to 13,227.70.

Volume on the US exchanges was 12.10 billion shares, compared to 14.04 billion on average for the full session over the last 20 trading days.

Shares of GameStop Corp fell 6.5% ahead of the company’s fourth quarter results due later Tuesday. The video game retailer has announced the departure of its chief customer officer in the latest sign of a larger overhaul at an ecommerce business.

ViacomCBS Inc fell 9.1% after the media company launched $ 3 billion in equity trades to raise capital for streaming investments.

U.S.-listed shares of Chinese internet search provider Baidu Inc slipped 1.7% following a stable start in Hong Kong, with investors wary of a fundraising wave in the city and resisting question the company’s growth plans.

Falling issues outnumbered those that rose on the NYSE by a ratio of 3.42 to 1; on the Nasdaq, a ratio of 6.64 to 1 favored the declines.

The S&P 500 posted 11 new 52-week highs and no new lows; the Nasdaq Composite recorded 45 new highs and 99 new lows. (Reporting by Herbert Lash in New York Additional reporting by Medha Singh and Devik Jain in Bengaluru edited by Maju Samuel and Matthew Lewis)

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