Stocks trim some losses, but Dow still down more than 500 points amid tech sell-off

Stocks fell sharply on Thursday as investors paused in the wake of a recent rally to all-time highs. Tech, the market leader since the rebound began in late March, was the biggest laggard. 

The Dow Jones Industrial Average dropped 800 points, or more than 2%. The S&P 500 slid 3.3% and the Nasdaq Composite fell by 4.8%.

Apple shares fell more than 7% and were on pace for their worst day since March 16, when the plunged 12.9%. Facebook, Amazon and Alphabet were all down at least 5%. Microsoft slipped 5.5%. Netflix pulled back by 3.4%. The S&P 500 tech sector traded 5.6% lower and was on track for its biggest one-day decline since June 11, when it fell 5.8%. The sector was also headed for its first losing session in 11 trading days. 

“Someone hit the ‘sell tech, buy dreck’ button and this is creating a bid beneath beleaguered groups, while [tech] gets pummeled,” said Adam Crisafulli of Vital Knowledge. “For tech specifically, the stocks are seeing large percent declines, but this comes after a massive recent rally. Tech has been untethered from fundamentals for a while and momentum can work in both directions.”

Shares of beaten-down companies that would benefit from the economy reopening rose, bucking tech’s negative trend. Cruise operator Carnival advanced 5.1%. Macy’s popped 9.4%. 

Thursday’s moves came after another record-setting session for the S&P 500 and the Nasdaq Composite. That run-up was powered by cyclical stocks, those that move in response to the health of the U.S. economy, and added to the market’s strong strong move off the March 23 lows. 

Since late March, the S&P 500 is up more than 55% and the Nasdaq has rallied nearly 70%. The Dow has surged more than 50% in that time. To be sure, some analysts think it may be time for the market to consolidate some of its recent sharp gains. 

“While we don’t expect a crash to happen again now, we don’t need new highs to grow every day to keep the uptrend alive either,” said Frank Cappelleri, executive director at Instinet, in a note. “With the [S&P 500] up 9/10 days and having just logged its biggest advance in two months, it’s certainly earned a period of which to digest.

Jobless claims improve

Thursday’s decline came even after better-than-expected unemployment data. 

The number of first-time filers for unemployment benefits totaled 881,000 for the week ending Aug. 29, the Labor Department said Thursday. Economists polled by Dow Jones expected first-time applications to have decelerated to 950,000 during the week ending Aug. 29.

That report came a day ahead of a widely anticipated U.S. jobs report. Economists polled by Dow Jones expect the U.S. economy to have added 1.321 million jobs in August. The jobs report will be released as lawmakers struggle to reach a deal on further coronavirus stimulus. 

“Let me be clear: The only reason we do not have a stimulus bill passed yet is because the economy and the markets are performing much better than people thought possible,” said Tom Essaye, founder of The Sevens Report. “The ‘best’ outcome for stocks into tomorrow’s jobs report is for a strong number, but not so much better than estimates that it relieves more pres-sure on Congress to get a deal done.”

—CNBC’s Yun Li contributed reporting.

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