The Nasdaq index fell more than 2% on Tuesday as steep declines in megacap growth stocks led Wall Street below record trading levels, with investors seeking shelter in more defensive parts of the market.
“When you’re at all-time highs and the market pulls back, the ones that tend to lead to the downside are often the high-beta stocks such as technology,” said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.
“When we have pauses or pull backs people tend to move out of growth stocks into more defensive names.”
Copious stimulus measures, speedy vaccination drives and the Federal Reserve’s accommodative policy stance have spurred a strong rebound in the U.S. economy and pushed Wall Street to record highs this year. The so-called “pandemic winners”, however, have recently started to fall out of favor.
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U.S. and European stock markets also saw a sudden 0.5% drop in hefty volumes around 7:30 a.m. ET on Tuesday, leaving traders scratching their heads and one calling it a “micro flash crash”. read more
At 10:03 a.m. ET the Dow Jones Industrial Average (.DJI) was down 256.42 points, or 0.75%, at 33,856.81, the S&P 500 (.SPX) was down 45.00 points, or 1.07%, at 4,147.66, and the Nasdaq Composite (.IXIC) was down 280.58 points, or 2.02%, at 13,614.54.
First-quarter earnings have been largely upbeat. Average profits at S&P 500 companies are expected to have risen 46% in the quarter, compared with forecasts of a 24% growth at the start of April, according to IBES data from Refinitiv.
Investors also waiting for data through the week, including the Labor Department’s non-farm payrolls data, slated to be released on Friday. The report is expected to show a rise in job additions in April.
Declining issues outnumbered advancers for a 3.19-to-1 ratio on the NYSE and a 5.83-to-1 ratio on the Nasdaq.
The S&P index recorded 42 new 52-week highs and no new low, while the Nasdaq recorded 45 new highs and 59 new lows.
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