By Medha Singh and Shreyashi Sanyal
(Reuters) - U.S. stocks went back into the red on Monday after regulatory fears sent shares of internet giants Alphabet (NASDAQ:GOOGL), Facebook and Amazon.com (NASDAQ:AMZN) sharply lower, particularly weighing down on the tech-laden Nasdaq.
Facebook Inc (NASDAQ:FB) tumbled 7.4% after the Wall Street Journal reported that the Federal Trade Commission (FTC) has secured the right to examine how the social media company practices affect digital competition. The stock was on pace for its biggest one-day drop since July 26.
Alphabet Inc tumbled 6.7% after sources told Reuters the U.S. Justice Department is preparing an investigation to determine if the Google-parent broke antitrust laws. Amazon.com slipped 4.3% on a report that the e-commerce giant could be put under the watch of the FTC.
"The concerns that the government is going to get involved and possibly break these companies up or impose fines on their operations is a major concern here," said Robert Pavlik, chief investment strategist and senior portfolio manager at SlateStone Wealth LLC in New York.
Facebook and Alphabet dragged the communication services sector down 3.09%, while Amazon shares pulled the consumer discretionary sector down 1.3%.
The ISM survey showed U.S. manufacturing growth unexpectedly slowed in May, accelerating demand for safety of government bonds. Two-year yields (US2YT=RR) hit their lowest since September 2017 on growing conviction that the Federal Reserve will start cutting interest rates to stave off a recession.
The data is the latest Sino-U.S. trade war fallout which flared up dramatically last month and ended with U.S. President Donald Trump threatening tariffs on all Mexico imports. Wall Street's main indexes ended May at least 6% lower and the S&P is now 7.7% away from its all-time high hit on May 1.
"The sentiment is waning, it's one of cautiousness," said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. "It sure appears to be a continuation of the May sell-off but will it be as ugly as May, is the question."
At 12:55 p.m. ET the Dow Jones Industrial Average was down 29.17 points, or 0.12%, at 24,785.87, the S&P 500 was down 10.29 points, or 0.37%, at 2,741.77 and the Nasdaq Composite was down 96.12 points, or 1.29%, at 7,357.03.
Healthcare stocks rose 0.40%, while the Nasdaq biotech index advanced 1.29%, helped by shares of companies including Amgen Inc (NASDAQ:AMGN) and Merck & Co that reported positive drug data at the ongoing annual American Society of Clinical Oncology meeting in Chicago.
Amgen jumped 4.0% after its drug showed a high response rate in a small lung and colon cancer trial, while Merck rose 1.3% after data showed nearly a quarter of patients who received immunotherapy Keytruda as an initial treatment for advanced lung cancer were still alive after five years.
Humana (NYSE:HUM) gained 1.4% after saying it would not make a bid to combine with health insurer Centene (NYSE:CNC) Corp, which plunged 10.7%.
Boeing (NYSE:BA) Co, the single largest U.S. exporter to China, fell 1.4% and was the biggest drag on the blue chip Dow index.
Advancing issues outnumbered decliners by a 1.51-to-1 ratio on the NYSE. Declining issues outnumbered advancers for a 1.12-to-1 ratio on the Nasdaq.
The S&P index recorded 12 new 52-week highs and 21 new lows, while the Nasdaq recorded 18 new highs and 135 new lows.