By Caitlin Ostroff and Juliet Chung
Losses by big technology companies led U.S. stock declines on Thursday, pausing Wednesday’s rebound after a recent technology-led selloff.
The tech-heavy Nasdaq Composite Index dropped 221.97 points, or 2%, to 10919.59, and the S&P 500 fell 59.77 points, or 1.8%, to 3339.19, marking the first time since March both indexes have fallen for the fourth time in five days. The Dow Jones Industrial Average closed down 405.89 points, or 1.5%, to 27534.58.
The so-called FAANG stocks, made up of Facebook Inc., Apple Inc., Amazon.com Inc., Netflix Inc. and Google parent Alphabet Inc., lost their early gains, and then some. Amazon and Apple lost 2.9% and 3.3% and Netflix Inc., 3.9%. Other technology companies retreated, too; Microsoft Corp. was down 2.8% and chip maker Nvidia Corp. lost 3.2%.
Tech shares had risen broadly Wednesday following a three-session selloff that pushed the Nasdaq into correction territory. The recent selloff was accompanied by a broad retreat from other risky assets, raising questions among some investors about the foundation of the market recovery.
“The market was ahead of itself in the technology sector and it still is, ” said David Bahnsen, investment chief for wealth-management firm Bahnsen Group, or wealth-management firm Bahnsen Group, which invests and advises on $2.5 billion in client money. He noted the Nasdaq had soared more than 60% from its March low. Recent selloffs don’t “mean all the froth has come out,” he said.
Mr. Bahnsen said he had trimmed his clients’ holdings in Apple Inc. over the summer and was readying, for the first time in a decade, to exit Apple entirely. He said he believed Apple was overvalued and its dividend, paltry, and said his clients’ cash could find better value elsewhere.
Karen Firestone, chief executive of Boston-based Aureus Asset Management, said gains in early-day trading may have been driven by chatter about Congress having reached a deal on a fresh stimulus package and that the retreat may have been precipitated by those hopes petering out.
Still, she noted the S&P, which closed at 3339.19, remained near its February high of 3386. She described Thursday’s pullback as a minor one compared with the market’s strong gains since the low in March.
“The market was incredibly strong; some stocks were just euphoric on the upside, like Tesla and Zoom,” Ms. Firestone said. A retreat is “a natural occurrence and probably healthy. The market has to find a comfortable level at which to settle.”
The recent slide in tech stocks has raised worries that the market, which had risen so sharply over the summer, could be set for a more turbulent period. Markets were choppy Thursday on light volume, and until the afternoon, edged higher and lower on little news.
“We could see volatility continue just because there are so many factors if you think about the lack of progress on fiscal stimulus in the U.S. and the [Covid-19] case counts,” said Wei Li, head of iShares EMEA investment strategy at BlackRock. “It’s just hard to think we can put this to bed.”
On Thursday, the government said about 884,000 Americans applied for unemployment benefits in the week ended Sept. 5, unchanged from the prior week. The labor market has gradually improved after the coronavirus pandemic struck this spring but new jobless claims remain at historically high levels.
Congress remains deadlocked over a fresh stimulus package. On Wednesday, Senate Republicans said they would support a scaled-back $300 billion version of their earlier $1 trillion stimulus plan, including jobless aid, liability protections for businesses and school funding. Democrats oppose the bill, and it isn’t expected to clear its first procedural hurdle in the Senate on Thursday.
Quest Diagnostics was among the S&P’s biggest gainers Thursday, climbing 3.2%. Shares in AstraZeneca PLC were down 0.6%, despite the company’s chief executive saying a Covid-19 vaccine it is developing with the University of Oxford could still be ready by the end of the year.
Electric-car maker Tesla Inc. gained 1.4%. Citigroup Inc. shares fell 0.9%; the bank announced Thursday Jane Fraser will become its next chief executive, marking the first woman to run a major Wall Street bank when Michael Corbat retires in February.
Tensions between Washington and Beijing continued to loom over markets. More than 70% of U.S. companies polled by the American Chamber of Commerce in Shanghai expect geopolitical turbulence to create operational difficulties for them over the next three to five years, up sharply from roughly half that said the same thing last year.
In the bond market, the yield on the 10-year Treasury ticked down to 0.684%, from 0.702% on Wednesday. Bond yields and prices move in opposite directions.
U.S. crude-oil futures edged down 2% to $37.30 a barrel. Prices have fallen lately with data indicating a slowdown in fuel demand at the end of summer and crude inventories rising.