U.S. stocks nosedived, dragged down by tech, in a wild day of trading Thursday, slamming the brakes on a record-shattering run that had lifted Wall Street to new heights.
The Dow Jones industrial average plunged 807.77 points, or 2.8%, to close at 28,292.73. The Standard & Poor’s 500 index shed 125.78 points, a 3.5% slide, to end at 3,455.06. And the tech-heavy Nasdaq composite, which has been showering investors with relentless gains for months, gave up 598.34 points, or nearly 5%, to settle at 11,458.10.
The technology giants were among the hardest hit in the selling frenzy. Apple, the most highly valued publicly traded company in the United States, shed more than 6%. But the iPhone-maker still retained its singular distinction of being worth more than $2 trillion, highlighting its staggering ascent the past year. The five other technology companies whose dramatic growth has buoyed the broader market — Facebook, Microsoft, Alphabet, Amazon and Netflix — all lost between 3% and 6%.
But their steep declines underscored just how remarkably their share prices recovered from the lows of March, when the coronavirus was first taking hold of the country.
Nicole Tanenbaum of Chequers Financial Management said it is not unusual to see stocks readjust after such a massive run, and that it is healthy for markets to hit the pause button following months of nearly uninterrupted gains.
“The market is taking a moment to catch its breath,” she said. “As investors continue to assess uncertainties around the latest Covid news, the economy, potential for a vaccine, and the election, we should expect more bumps in the road ahead.”
Investors have been anticipating another round of emergency coronavirus relief from the federal government. The initial wave of funds helped lift vulnerable Americans as the pandemic battered the economy. But negotiations between the White House and Congress have stalled. And last month, tens of millions of people lost $600 in enhanced weekly unemployment benefits.
“Concerns about whether an adequate fiscal stimulus package could come to fruition weighed down on stocks today, especially tech stocks which have had such a strong run up,” said Kristina Hooper, chief global market strategist at Invesco. Tech investors in particular are grappling with the threat of heightened regulation next year and beyond. The market is also reacting to concerns of a potentially contested election, she said.
Michael Farr, president of Farr, Miller & Washington, said that in a normal market, investors could expect a 10% to 15% decline, which would likely lead to a subsequent rebound and a return to recent stock market highs. But the extraordinary intervention from the Federal Reserve and from Congress has limited how far Wall Street can fall, he said. “My gut says this one will not be long or deep.” The sell-off, he added, could ring the alarm for Congress, pressing elected leaders to vote on an extended rescue package that both political parties could benefit from.
The Labor Department reported that more than 800,000 new claims for unemployment insurance were filed last week, the latest indicator that the pandemic continues to pummel the labor market. Altogether, 29 million people are receiving some form of unemployment insurance, an increase of 2 million from the prior week.
Heading into Thursday’s dismal 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.