Tech rout pulls down Nasdaq by 3.5%, biggest loss since October

Rising bond yields on Thursday triggered a broad Wall Street sell-off that erased the market’s gains for the week and handed the Nasdaq composite its biggest loss in nearly four months.

The S&P 500 dropped 2.4%, led lower by heavy selling in technology and communications companies. The tech-heavy Nasdaq fell 3.5%, its biggest skid since October.

The sell-off took hold when the yield on the 10year U.S. Treasury note moved above 1.5%, a level not seen in more than a year and far above the 0.92% that it was trading at only two months ago. The move raised the alarm on Wall Street that yields, and the interest rates they influence, will move higher from here.

“The yield on the 10year note crossed the line in the sand at 1.50%, which from a technical perspective further confirms that higher rates are likely,” said Sam Stovall, chief investment strategist at CFRA.

Bond yields have been rising this month, reflecting growing confidence among investors that the economy is on the path to recovery but also concern that inflation is headed higher. Rising yields can make stocks look less attractive relative to bonds to some investors, which is why every tick up in yields recently has corresponded with a tick down in stock prices.

The S&P 500 index fell 96.09 points (2.4%) to 3,829.34. The Dow Jones Industrial Average lost 559.85 (1.8%) to 31,402.01. The Nasdaq slid 478.54 (3.5%) to 13,119.43. The Russell 2000 index of smaller company stocks lost 84.21 (3.7%) to 2,200.17.