Stocks fell sharply in volatile trading on Thursday as the rout in tech — the best-performing sector in the market — resumed after a one-day respite.
The Dow Jones Industrial Average traded 368 points lower, or 1.3%. Earlier in the session, the Dow was up more than 200 points. The S&P 500 slid 1.6% and the Nasdaq Composite was down 1.9% after surging as much as 1.4%.
“It’s a tricky market,” said Arian Vojdani, investment strategist at MV Financial. “You look up one second and the market’s down. You look down the other second and you’re back up.”
“Investors would be amiss to try and trade on this right now,” said Vojdani.
Apple shares were down 3.6% after rising as much as 2.7%. Tesla, which was up more than 8% at one point, traded marginally higher. Netflix and Microsoft were both lower along with Facebook and Amazon.
Thursday’s moves follow a broad rally for the market on Wednesday, with the S&P 500 posting its best day since June. The Nasdaq pulled itself out of correction territory as tech managed to claw back some of its recent steep losses.
“Wednesday witnessed a partial recovery … but we do believe that the switchback ride of the last 5 weeks will have placed at least a temporary cap on the powerful advance that has taken place since March,” Michael Shaoul, chairman and CEO of Marketfield Asset Management, said in a note. “This is not to say that the damage is irreversible, particularly if key support at the 50‐day moving average manages to hold in the coming sessions, but it will probably take a few weeks before the September 2nd high can be fully tested or surpassed.”
The S&P 500 tech sector fell 11.4% between the close of Sept. 2 — when the market hit an all-time high — and Tuesday. Over that time period, the S&P 500 dropped nearly 7%. Tech then clawed back some of its losses on Wednesday, posting its biggest one-day surge since April.
The three-day drop came amid increasing worry on Wall Street about a tech bubble, with those stocks fueling the Nasdaq to record highs despite the coronavirus pandemic’s hit to the economy. Some said the pullback did not go far enough, with Duquesne Family Office CEO Stanley Druckenmiller telling CNBC on Wednesday morning that the market was in an “absolute raging mania.”
Others pointed to reasons why the market could regain its footing once again. Liz Young, the director of market strategy for BNY Investment Management, said the investor cash still parked on the sidelines after the pandemic-induced sell-off in February and March should provide support for stocks.
“People go to cash in droves — and it’s immediate, it’s a big wave. They come back in drips. So as it drips back in, that cash is going to look for more attractive valuation opportunities. So I think it’s natural that it would look for things that have been a little more beaten down or some of the stocks that haven’t driven us up to this point,” Young said on “Closing Bell.” “But I don’t think we’re in a place now where you have to start selling rallies and taking exposure off the table.”
Jobless claims disappoint
Traders pored over key unemployment data on Thursday.
The Labor Department said the number of first-time filers for unemployment benefits came in at 884,000. Economists polled by Dow Jones expected claims to come in at 850,000.
“Economic growth will rebound sharply in Q3 and again in Q4 but these labor market stats still point to a long way to go in terms of hiring,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group.
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