Stocks ended sharply lower Thursday, falling the most since June, as investors rotated out of tech stocks following their red-hot rally.
The Dow Jones Industrial Average fell 807 points, or 2.78%, to 28,292. The S&P 500 fell 3.51%, and the tech-heavy Nasdaq ended down 4.96%, led by declines in Apple (AAPL) - Get Apple Inc. (AAPL) Report, Nvidia (NVDA) - Get NVIDIA Corporation Report, Microsoft (MSFT) - Get Microsoft Corporation (MSFT) Report and Amazon (AMZN) - Get Amazon.com, Inc. Report.
"A pullback in tech stocks right now is understandable," said David Bahnsen, chief investment officer of Bahnsen Group in Newport Beach, Calif. "The Nasdaq has advanced violently since March, and many names are at absurd valuations."
And Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, said, "We don’t believe the bull market is going to end any time soon, but a healthy pullback or even a correction is part of all bull [markets. And] it’s easy to point to the November election, news that China is pursuing their own home-grown chip-making industry, or the upcoming flu season as reasons to get bearish,"
Stocks were coming off Wednesday's solid gains, when the Dow surged more than 450 points, or 1.6%, to 29,100 for Wall Street's best day in nearly two months. The S&P 500 rose 1.5% Wednesday for its best day since July 6, and the Nasdaq jumped 0.98%. Both indexes closed at record.
The rally has been driven by infusions of credit from the Federal Reserve and hopes that the mad dash by drug companies to find a vaccine to end the coronavirus pandemic soon will prove fruitful.
The Centers for Disease Control and Prevention has told U.S. states to prepare for a covid-19 vaccine to be ready by Nov. 1, an aggressive timeline that comes just days before President Donald Trump stands for reelection.
The Justice Department plans to bring an antitrust case against Google parent Alphabet (GOOGL) - Get Alphabet Inc. Class A Report as soon as this month, the New York Times reported. Attorney General William P. Barr overruled career lawyers who said they needed more time to build a strong case against the company, the paper reported.
Weekly initial jobless claims in the U.S. came in slightly better than forecast.
The number of Americans applying for first-time jobless benefits came in lower than expected, though a new way of calculating unemployment applications likely sugar-coated the numbers.
The Labor Department reported Thursday that 881,000 Americans filed for first-time jobless benefits for the week ended Aug. 22, down from a revised 1.006 million claims the week earlier. Economists polled by FactSet had been expecting claims of 965,000.
The unemployment claims numbers "show a labor market continuing to struggle, and not showing improvement despite Covid-19 levels that declined in August," said Robert Frick, corporate economist at Navy Federal Credit Union.
"While Friday's August jobs numbers should still show an improvement, September may see the unemployment rate stall around 10% if the current unemployment claim trends continue," Frick added.
The nonfarm payrolls report for August will be issued by the Labor Department on Friday.