Wall Street’s main indexes closed sharply lower on Thursday, marking their deepest one-day dives in months as investors dumped the high-flying technology sector, while economic data highlighted concerns about a long and difficult recovery.
The technology-centric Nasdaq led the declines as its heavyweight stocks took a hit with the biggest drags from companies including Facebook Inc, Apple Inc, Amazon.com Inc, Microsoft Inc and Google-parent Alphabet Inc.
The five stocks, deemed strong bets because of solid cash positions and continued growth despite the coronavirus crisis, also account for roughly a quarter of the S&P 500’s market value and have driven the stock market’s narrow technology-led recovery from the pandemic lows hit in March.
The Philadelphia chip index and the S&P tech sector also dropped more than five per cent each, the latter’s biggest drop since June.
The pullback comes a day after the S&P 500 and the Nasdaq closed at record levels and the Dow came within 1.5 per cent of its February peak, powered by fiscal and monetary support hopes for a swift economic recovery. But some participants said investors had become too optimistic.
“Think about the mounting number of risks the market has been shrugging off over the last couple of months here,” said Emily Roland, co-chief investment strategist and John Hancock Investment Management. “We’re 60 days away from the election. That may be an area where investors are getting a bit spooked.”
She added: “Looking at the data today, the market has had the ability to power higher and hasn’t paid any attention to a macro environment which, yes, is improving which is encouraging, but the economy remains fragile here.”
Earlier in the day, data showed the number of Americans filing new claims for unemployment benefits fell more than expected last week, but remained extraordinarily high. The closely watched monthly payrolls report is set for Friday.
Separately, a survey showed U.S. services industry growth slowed in August, likely as the boost from the reopening of businesses and fiscal stimulus faded.
Unofficially, the Dow Jones Industrial Average fell 811.33 points, or 2.79 per cent, to 28,289.17, the S&P 500 lost 125.96 points, or 3.52 per cent, to 3,454.88 and the Nasdaq Composite dropped 598.34 points, or 4.96 per cent, to 11,458.10.
Wall Street’s fear gauge crossed its 200-day moving average to hit its highest level in weeks.
Still, some investors seemed unconcerned in the face of the sell-off.
“(Investors) are in love with tech stocks and it’s going to take more than this for them to fall out of love with them,” said Mike Zigmont, head of trading and research at Harvest Volatility Management in New York.
Sebastian Leburn, senior portfolio manager at Boston Private in Florida, said the decline was “just a rotation” out of technology stocks: “I don’t think it’s anything ominous.”
Another Nasdaq heavyweight, Tesla Inc, tumbled again on Thursday after already falling sharply for two straight sessions.
PVH Corp rose after the Calvin Klein owner posted a surprise quarterly profit, boosted by strong online demand for comfortable and casual clothing during the coronavirus-led shift to work from home.