US stock markets fall for the second day amid tech selloff
US stock markets fell sharply again on Friday then rebounded in a volatile day of trading as investors soured on the high-flying tech companies that had driven markets to record highs.
The S&P 500 fell 3% at the low point on Friday but ended down 0.8% and the Dow Jones Industrial Average, which had fallen 850 points, ended down 0.56%. The tech-heavy Nasdaq Composite retreated 1.27% after regaining morning losses of 5%. All three indexes had dropped significantly on Thursday, their biggest one-day declines since June.
In Europe stock markets also closed down. In London the FTSE dropped 0.88%, Germany’s DAX dropped 1.65% and in France the CAC dropped 0.89%. Asian markets had also closed down after Wall Street’s fall.
The falls in the US were led by the technology sector, whose share prices have soared during the coronavirus pandemic as investors have bet more business will move permanently online.
Tech’s soaring share price has reportedly been fueled by a $50bn bet on the sector by Japan’s SoftBank. The huge buying spree helped drive tech stocks and stock markets to new highs, The Wall Street Journal reported. And the unwinding of those trades may have contributed to the dramatic sell off.
Shares of Apple fell 7%, while Facebook and Amazon slid more than 6%. Google parent Alphabet and Microsoft both fell at least 4%. Zoom, the video conferencing company whose shares were up 400% before the fall, lost another 4%. The share prices of all the companies still remain sharply up for the year and before Thursday the S&P 500 had been up in nine of the last 10 trading sessions.
Michael Antonelli, the managing director of institutional sales trading at Robert W Baird in Milwaukee, said the selloff so far appeared to be driven by profit-taking as investors cashed in some of the huge gains they have made on tech stocks.
“Apple was going up 3-4% a day recently. I don’t know a world where people would not take some profits in that situation,” he said. “The air started coming out of the tires yesterday and that seems to be continuing today.”
Friday’s selloff came as the US announced employers had added another 1.4m jobs in August and the unemployment rate fell to 8.4%, the first time it has dipped below 10% since the pandemic hit the US economy.
Antonelli said the figures were slightly better than expected but that, for now, it was the tech sector rather than the jobs figures that were driving the selloff. “I would get concerned if this starts to bleed into other sectors,” he said. But for now, he said, the selloff was about the tech companies going “too far, too fast”.