Northwest Arkansas Democrat-Gazette
Stock sell-off
Tech rout sends market to biggest loss since June.
NEW YORK — Wall Street’s euphoria took a break Thursday, as steep losses in technology stocks dragged the rest of the market down with them.
It was the biggest decline for the U.S. stock market since early June, when investors were dealing with a surge of coronavirus infections in places like Florida, Texas and Arizona. There seemed to be no explicit catalyst for the sell-off, with economic data coming in roughly where the market had expected and no companies issuing foreboding warnings.
That said, the market felt due for a breather, investors said. Both the S&P 500 and Nasdaq had hit record highs just the day before. Before Thursday, the S&P 500 had risen nine out of the previous 10 days.
The Dow Jones Industrial Average fell 807.77 points, or 2.8%, to 28,292.73. It was briefly down 1,000 points.
The S&P 500 index lost 125.78 points, or 3.5%, to close at 3,455.06. The technologyheavy Nasdaq dropped 598.34 points, or 5%, to 11,458.10.
Big Tech stocks like Apple, Amazon and Facebook have made massive gains this year. Investors have been betting those companies would continue posting huge profits as people spend even more time online with their devices, but recently market watchers have been questioning whether those gains were overdone. Apple is still up 64.7% for the year, and Amazon is up 82.3%.
“There’s really very little to justify [these big stocks’ upward move] other than euphoria,” said Mark Hackett, chief of investment research
(AP/Mark Lennihan) at Nationwide.
Hackett also noted the market has “embedded very optimistic assumptions” about the virus’s impact on the economy, as well as on prospects for Congress and the White House coming up with another economic relief package.
The government reported that the number of Americans who applied for unemployment benefits fell last week to 881,000, slightly better than what economists expected. That said, companies are still letting workers go at numbers well above those seen in the 2007-09 recession, meaning the jobs picture remains bleak despite recent improvements.
The stock market has rallied this spring and summer after plunging in March as investors realized the economic toll the coronavirus pandemic was going to take. Most of the rally has been on strong performances from tech stocks, but also a hope that the worst of the pandemic is in the past, despite rising infections in schools and the possibility of a second surge of infections in the fall. Huge amounts of support from the Federal Reserve and Congress have also helped bolster the economy.
Investors will be paying close attention today when the Labor Department releases its August jobs report. Economists surveyed by FactSet forecast that the U.S. economy created 1.4 million jobs in August, but that would be down from 1.74 million jobs in July. Tens of millions of Americans remain unemployed, however, as seen by this week’s unemployment benefits numbers.
If the jobs numbers do not deliver, it’s unlikely the stock market will rally much higher from here, analysts said.
Technology stocks, which account for a significant chunk of the U.S. stock market’s value these days, fell broadly. Apple dropped 8%, Amazon lost 4.6% and Facebook gave back 3.8%. Semiconductor stocks also fell sharply. Nvidia, Qorvo and Advanced Micro Devices fell 8% or more. Even with Thursday’s drop, Nvidia is still the biggest gainer in the S&P 500 so far this year.
The stocks that did better than the rest of the market Thursday were some of those that have been beaten down this year: travel companies and airlines. Carnival Corp. rose 5.2%, Norwegian Cruise Lines rose 3.8% and Royal Caribbean climbed 2.7%.
Heading into Thursday’s session, the stock market was blazing hot. On Wednesday, the Dow rose 458 points, inching within 1.5% of its all-time high of 29,551, set Feb. 12. The S&P 500 set its 22nd record of the year, reaching 3,580. And the Nasdaq notched its 43rd record finish, climbing to 12,056.
The three major indexes had a stunning rise in August, which marked the end of the bear market. Both the S&P 500 and the Dow turned in their best performances since the mid-1980s, gaining 7% and 7.6%, respectively. And the Nasdaq reached even higher, surging 9.6% for its highest August return since 2000. Information for this article was contributed by Hamza Shaban and Hannah Denham of The Washington Post.