The Nasdaq fell more than 2% on Tuesday as steep declines in mega-cap growth stocks pushed Wall Street below record trading levels as investors sought shelter in more defensive parts of the market.
Popular tech companies such as Microsoft Corp (MSFT.O), Alphabet Inc (GOOGL.O), Apple Inc (AAPL.O), Amazon.com Inc (AMZN.O) and Facebook Inc (FB.O) fell 2.3% and 4.2%.
All of the S&P 500’s top 11 sectors were down, with technology (.SPLRCT), communications services (.SPLRCL) and consumer discretionary (.SPLRCD) falling by more than 2% each.
The defensive consumer staples (.SPLRCS), utilities (.SPLRCU) and real estate (.SPLRCR) sectors fell the least.
“When you hit all-time highs and the market pulls back, the ones that tend to lead to the downside are often high beta stocks such as tech,” said Randy Frederick, vice president of trading and derivatives at Charles Schwab. in Austin, Texas.
“When we have breaks or pullbacks, people tend to move away from growth stocks and look to more defensive stocks.”
Fiscal stimulus, quick vaccinations and the Federal Reserve’s dovish stance have spurred a strong rebound in the U.S. economy and pushed Wall Street to record levels this year. However, the so-called “pandemic winners” have recently started to fall from favor.
The US and European stock markets also saw a sudden 0.5% drop in large volumes around 7:30 a.m. ET on Tuesday, leaving traders in awe. Read more
As of 11:49 a.m. ET, the Dow Jones Industrial Average (.DJI) was down 235.73 points, or 0.69%, to 33,877.50, the S&P 500 (.SPX) was down 56.17 points , or 1.34%, to 4,136.49 and the Nasdaq Composite (.IXIC) is down 379.74 points, or 2.73%, to 13,515.38.
Among other stocks, CVS Health Corp (CVS.N) gained 3.7% after reporting first quarter profit above analyst estimates and raising its forecast for 2021. Read more
The first quarter results were largely optimistic. According to IBES data from Refinitiv, average profits of S&P 500 companies are expected to have risen 47.7% in the quarter, compared to expectations of 24% growth in early April.
Investors are also waiting for data throughout the week, including the Labor Department’s monthly non-farm payrolls, due Friday. The report is expected to show an increase in job additions in April.
Falling issues outnumbered the advancers for a 2.37-to-1 ratio on the NYSE and a 4.03-to-1 ratio on the Nasdaq.
The S&P Index recorded 69 new 52-week highs and no new lows, while the Nasdaq recorded 66 new highs and 87 new lows.
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