Stocks on Wall Street fell Tuesday for a third straight session, led by another sharp sell-off in the same giant tech companies that had led the market back into record territory last month.

The Nasdaq composite tumbled more than 4%, in the latest of a string of declines for technology stocks that began last week as investors abruptly began to recalibrate their appetite for the previously highflying shares. The S&P 500 fell about 2.8%.

The reason for the sell-off remains at issue. Late last week, The Financial Times reported that SoftBank, a Japanese conglomerate that has a history of making huge bets, had been a large buyer of options linked to the rising tech stocks, helping supercharge both the tech sector and the broader stock market in August. SoftBank declined to comment.

But the idea that a single large buyer could have accounted for the recent momentum of giant tech stocks — Apple alone was up more than 20% last month — fed the worry among some investors and analysts that the tech rally had gone too far too fast.

“We’ve seen these incredible runups,” said JJ Kinahan, chief market strategist at TD Ameritrade. “People are starting to question their valuation.”

The Nasdaq composite is now down 10% from its peak on Sept. 2, a drop that’s called a correction by market watchers to indicate that something more significant than a garden-variety decline is underway. The S&P 500 is down about 7% from its highest point, also reached on Sept. 2.


On Tuesday, Apple fell more 6.7%, Microsoft dropped 5.4% and Facebook and Amazon were both down more than 4%. Google’s parent Alphabet declined more than 3%. Those companies have become crucial bellwethers of the broader market this year, accounting for an outsize share of the gains of indexes such as the S&P 500.

Since the coronavirus crisis hit in March, investors had flocked to buy their shares, increasingly convinced that their already dominant positions in the American economy would only grow stronger as lockdowns resulted in more working from home and less spending elsewhere.

As their market values surged, so did their influence over benchmarks like the S&P 500. At the end of last week, these five stocks accounted for some 24% of the market capitalization of S&P 500, according to Goldman Sachs analysts.

“You can make a very good argument that a pullback, if anything, is probably, I wouldn’t say healthy, but it’s certainly overdue,” said Julian Emanuel, chief equity and derivatives strategist at the brokerage firm BTIG.

Oil Prices Dive

Energy stocks also fared poorly on Tuesday, with Halliburton, Marathon Oil and Occidental Petroleum ranked among the worst performers on the S&P 500.

Tumbling crude prices drove the downturn, reflecting concerns about supply of crude as the summer driving season in the United States ends and with the Organization of the Petroleum Exporting Countries, which slashed oil production in May, now adding to output, joining producers in the United States, who are also gradually pumping more crude.


West Texas Intermediate, the American bench mark, fell 7.6% on Tuesday to $36.76 a barrel, while Brent crude, the international standard, dropped 5.3% to $39.78 a barrel.

Oil prices have rallied sharply from their April lows, when some futures prices fell into negative territory, and held steady during the summer. Now as traders look ahead, prices look too high. With the summer driving season over, the outlook for demand is weak over the next few months.

“Prices have diverged from fundamentals for awhile, “ said Amrita Sen, head of oil analysis at Energy Aspects, a market research firm.

The coronavirus pandemic, which has slammed demand, is clearly far from over, with cases rising in several countries including Britain, France and Spain. And there are signs that Chinese buyers who have stocked up on crude at what seemed low prices may be reaching their limit.

Tesla Rediscovers Gravity

Barely a week ago Tesla shares were flying higher than ever. The electric-car maker had just completed a five-for-one split of its shares, which closed at a split-adjusted record price. And after a fourth-consecutive quarter of profitability, it seemed on the brink of addition to the S&P 500, which would create new demand for its shares from index funds.

Now things don’t look as rosy. Tesla’s shares closed at $330.21 on Tuesday, down 21% on the day and one-third below their recent peak.


The tumble started after the company announced in a regulatory filing on Sept. 1 that it would raise up to $5 billion in capital by selling new shares “from time to time” at market prices. That figure represented barely 1% of Tesla’s market capitalization, but shares fell nearly 5%.

On Friday, Tesla was bypassed when the S&P 500 components were shuffled. And sentiment may have been influenced by the broader swoon in technology stocks.

“For the last 10 years, Tesla is a stock that has been very erratic,” said Karl Brauer, an independent auto analyst. “And in the runup in the last four months, the fundamentals simply didn’t make sense, so it’s natural that you will have big pullbacks at various times.”

Still, on a split-adjusted basis, the decline leaves Tesla shares roughly where they were in mid-August — and more than twice as valuable as in early May, when the chief executive, Elon Musk, said on Twitter that the “Tesla stock price is too high.”

The company’s market capitalization is three times the combined value of Ford Motor, General Motors and Fiat Chrysler.