Tech tumble jams Wall Street into reverse; sharpest fall since June
By Sinéad Carew
NEW YORK (Reuters) - Wall Street's main indexes closed sharply lower on Thursday, marking their deepest one-day declines since June as investors dumped the high-flying technology sector, while economic data highlighted concerns about a long and difficult recovery.
The Nasdaq led the pullback with a decline of almost 5% a day after it and the S&P 500 posted record closing highs.
The S&P tech sector <.SPLRCT> and the Philadelphia chip index <.SOX> both fell almost 6% on the day.
Markets had soared from March lows, powered by fiscal and monetary support hopes for a swift economic recovery. But some participants said investors had become too optimistic.
"Think about the mounting number of risks the market has been shrugging off over the last couple of months here," said Emily Roland, co-chief investment strategist at John Hancock Investment Management. "We're 60 days away from the election. That may be an area where investors are getting a bit spooked."
She added: "Looking at the data today, the market has had the ability to power higher and hasn't paid any attention to a macro environment which, yes, is improving which is encouraging, but the economy remains fragile here."
Earlier in the day, data showed the number of Americans filing new claims for unemployment benefits fell more than expected last week, but remained extraordinarily high. The next big data focus for investors is Friday morning's monthly payrolls report.
Separately, a survey showed U.S. services industry growth slowed in August, likely as the boost from the reopening of businesses and fiscal stimulus faded.
The Dow Jones Industrial Average <.DJI> fell 807.77 points, or 2.78%, to close at 28,292.73, the S&P 500 <.SPX> lost 125.78 points, or 3.51%, to 3,455.06 and the Nasdaq Composite <.IXIC> dropped 598.34 points, or 4.96%, to 11,458.10.
While S&P and Nasdaq's percentage declines on Thursday were their deepest since June 11, it was the Dow's biggest one-day plunge since June 26.
It was the Nasdaq's third-biggest one-day fall from a record close, according to data from Bespoke Investment Group.
Wall Street's fear gauge <.VIX> crossed its 200-day moving average to hit its highest level in weeks. It closed up 7 points at 33.60.
Still, some investors seemed unconcerned in the face of the sell-off.
"(Investors) are in love with tech stocks and it's going to take more than this for them to fall out of love with them," said Mike Zigmont, head of trading and research at Harvest Volatility Management in New York.
Sebastian Leburn, senior portfolio manager at Boston Private in Florida, said the decline was "just a rotation" out of technology stocks: "I don't think it's anything ominous."
Another key Nasdaq component, Tesla Inc (NASDAQ: TSLA), tumbled 9% on Thursday after falling sharply the previous two sessions.
PVH Corp (NYSE: PVH) rose 3.3% after the Calvin Klein owner posted a surprise quarterly profit, boosted by strong online demand for comfortable and casual clothing during the coronavirus-led shift to work from home.
Declining issues outnumbered advancing ones on the NYSE by a 4.14-to-1 ratio; on Nasdaq, a 4.20-to-1 ratio favored decliners.
The S&P 500 posted 18 new 52-week highs and no new lows; the Nasdaq Composite recorded 24 new highs and 53 new lows.
About 11.98 billion shares changed hands in U.S. exchanges, compared with the 9.22 billion daily average over the last 20 sessions.
(This story corrects to say "at John Hancock" instead of "and John Hancock" in paragraph eight)
(Reporting by Sinead Carew in New York; Additional reporting by Chuck Mikolajczak, Terence Gabriel, Reuters market analyst, Medha Singh and Devik Jain in Bengaluru; Editing by Maju Samuel and Matthew Lewis)