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U.S. stocks fell sharply on Thursday as highflying tech shares reversed their heady momentum in recent weeks, dragging the rest of the market lower.
How are equity indexes performing?
The Dow Jones Industrial Average DJIA, -2.12% was down 548.34 points, or 1.9%, at 28,552.16, after dropping more than 800 points at its session low. The S&P 500 SPX, -2.91% slipped 91.57 points, or 2.6%, to 3,489.27. The Nasdaq Composite COMP, -4.34% tumbled 463.53 points, or 3.8%, to 11,592.91. All three indexes are on track to record losses for the week.
On Wednesday, Dow surged 454.84 points, or 1.6%, ending at 29,100.50, or 1.5% away from its Feb. 12 closing high of 29,551.42. The S&P 500 index climbed 54.19 points, or 1.5%, to settle at a record 3,580.84, its 22nd record close this year. The Nasdaq Composite Index advanced 116.78 points to close at a record 12,056.44, a gain of 1%, and its 43rd record close of the year.
What’s driving the market?
After a day of records for the S&P 500 and the Nasdaq Composite on Wednesday, investor optimism waned as large-capitalization technology-related stocks led losses on Thursday.
Doubts about traction for further fiscal stimulus from Washington lawmakers may be one factor discouraging investors who have been betting on Republicans and Democrats striking a deal later this month to offer additional relief to American consumers and businesses. On Tuesday, House Speaker Nancy Pelosi said Democrats and Republicans still have “serious differences,” following a brief phone call.
Investors have also been calling for a rotation away from the leading tech stocks to the broader market in the hopes that it would strengthen the stock-market rally’s foundations.
“There is a sort of benign way that this excess can be corrected through a process of rotation,” said Liz Ann Sonders, chief investment strategist at Schwab, in an interview. She said positive economic data could lay the path for a more sustainable rally.
Thursday’s round of economic data continued to point to a steady recovery, though the prospects for the labor market were unclear ahead of Friday’s official jobs report.
New applications for unemployment benefits in the latest weekly period ending in Aug. 29 fell 130,000 to a seasonally adjusted 881,000 or lower than the consensus estimate of 940,000 but this was after the Labor Department said last week it tweaked its seasonal adjustment method amid the COVID-19 pandemic. The unadjusted or real number of initial jobless claims rose slightly to 833,353 from 825,761, indicating there was barely any change last week in how many people are applying for benefits.
In other data, a revised reading of U.S. second-quarter productivity rose 10.1%, while the trade deficit widened to $63.6 billion.
The U.S. IHS Markit final purchasing managers index for the service sector for August was 55, up from 54.8 in July, while the Institute of Supply Management’s service sector indicator for August fell to 56.9 in August from 58.1 in July. Any number above 50 indicates an expansion in industrial activity.
By most measures, the economy is still considerably weaker now than it was before the pandemic. Millions of Americans remain out of work, Congress is deadlocked over another financial-aid package and many industries such as travel, tourism and entertainment are just a shell of their former selves.
Read: ADP says private sector added a less-than-expected 428,000 new jobs in August
Which stocks are in focus?
- Michaels Cos. Inc. shares MIK, -15.49% tumbled 17%, even after the arts and crafts retailer blew past estimates for the second quarter as stores reopened after being closed during the pandemic.
- Shares of Sanofi SNY, -1.48% gained 0.4% after the drugmaker and GlaxoSmithKline GSK, -1.94% said their COVID-19 vaccine candidate has entered a Phase 1/2 clinical trial.
- Arconic Corp. ARNC, -1.72% said Thursday it restored the salaries and 401K match for all of its U.S. salaried employees, including executives on Sept. 1, after cutting them earlier this year to counter the impact of the coronavirus pandemic. Its shares were down 1%.
- Shares of Designer Brands Inc. DBI, -20.27% plummeted 23% Thursday, after the parent of the DSW Designer Shoe Warehouse retail chain reported a wider-than-expected fiscal second quarter
- Facebook FB, -4.85% slipped 4.4% after announcing Thursday it will ban new political ads from running in the week before the Nov. 3 presidential election.
- Apple AAPL, -5.91% shares fell more than 7% and were on pace for their worst day since March 16, when the plunged 12.9%.
How are other markets trading?
The 10-year Treasury note yield TMUBMUSD10Y, 0.629% fell 4 basis points to 0.612%. Bond prices move inversely to yields.
The ICE U.S. dollar index DXY, +0.03% , which tracks the performance of the greenback against its major rivals, was flat for the day.
Gold futures GCZ20, -0.58% were treading water at $1,945.20 an ounce, on the New York Mercantile Exchange. U.S. benchmark crude futures CL.1, -1.49% fell 2% to $40.70 a barrel.
The Stoxx Europe 600 index SXXP, -1.40% was down 0.6%, while the U.K.’s benchmark FTSE UKX, -1.60% slipped 1.1%. In Asia, Hong Kong’s Hang Seng index HSI, -0.44% fell 0.5% and China’s CSI 300 000300, -0.55% closed 0.6% lower. The Nikkei NIK, +0.93% rose 0.9%.
