The U.S. economy just had its worse performance ever as businesses shut down across the country as well as much travel decline.
U.S. stocks took a steep tumble Thursday, posting their worst day since June after Big Tech stocks gave back some of their hefty gains over the past several months, which had powered Wall Street to record highs recently following a coronavirus-induced selloff in the spring.
The Dow Jones Industrial Average dropped 807.77 points, or 2.8%, to 28,292.73, its biggest selloff since June 11. It had briefly tumbled more than 1,000 points in afternoon trading after eclipsing 29,000 for the first time since February on Wednesday.
The S&P 500 slumped 3.5% to 3,455.06, also its biggest drop since June. The tech-laden Nasdaq Composite fell 5% to 11,458.10. Both indexes had set their latest record highs a day earlier, and the Nasdaq is still up nearly 28% for the year. The S&P 500 had been up nine of the last 10 trading days and posted its fifth straight monthly gain in August.
The Dow sits 4.3% away from its February record.
High-flying tech companies like Apple, Microsoft and Google parent Alphabet have made outsize gains in recent months as investors bet that they would continue posting huge profits in a stay-at-home economy.
Still, analysts have questioned recently whether those gains were overdone.
“There were no major headlines or obvious triggers for the plunge, but it’s left investors wondering if the day’s drop signals another historic market event, or just a little in-flight turbulence,” Lindsey Bell, chief investment strategist at Ally Invest, said in a note. “But even with today’s drop, we’re still above the peak we reached in February.”
David Bahnsen, chief investment officer at The Bahnsen Group, based in Newport Beach, Calif., agrees.
“A pullback in tech stocks right now is understandable,” Bahnsen said in a note. “The Nasdaq has advanced violently since March and many names are at absurd valuations.”
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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 cause. 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.
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 4.3% and Facebook gave back 3.8%.
Semiconductor stocks also fell sharply. Nvidia, Qorvo and Advanced Micro Devices fell at least 8.5%. Even with Thursday’s drop Nvidia is still the biggest gainer in the S&P 500 so far this year.
“The lack off a broad selloff across all sectors shows that there’s a good deal of ‘hot money’ chasing the large tech names,” Peter Essele, head of portfolio management at investment adviser Commonwealth Financial Network, said in a note.
Investors were also monitoring fresh economic figures. About 833,352 Americans filed first-time applications for unemployment insurance during the week ending Aug. 29, the Labor Department said Thursday, a 7,591 rise from the prior week and slightly more than economists were expecting.
Investors will be paying close attention Friday when the Labor Department releases its August job 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 tomorrow’s jobs numbers don’t deliver, it’s unlikely the stock market will rally much higher from here, analysts said.
Analysts said that could be a warning sign the job market is cooling after some U.S. states reimposed anti-virus controls and the expiration of supplemental unemployment benefits cut into consumer spending.
“Bullish stock market sentiment seems to be nearing a tentative peak as the labor market recovery stalls,” analyst Edward Moya of Oanda wrote in a report.
U.S. crude oil for October delivery fell 14 cents to settle at $41.37 a barrel. Brent crude, the international benchmark, fell 36 cents to $44.07 per barrel.
Contributing: The Associated Press
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