Losses for Amazon.com, Apple Inc., Microsoft Corp. and Facebook Inc. pushed the tech-heavy Nasdaq 100 down more than 5% at one point and its two-day rout to more than 10%, though it later pared declines.
While the broader market fared better, at 12:20 p.m., the S&P 500 was off 1.77% while the Nasdaq was down 2.43%. Treasury yields rose along with the dollar. European shares slumped.
The worst of Friday’s sell-off appeared to stem from concern that the recent run-up in tech shares wasn’t tied to broad investor sentiment, but instead was driven by outsize options trades from one firm. The Financial Times reported that SoftBank bought billions of dollars in tech derivatives before the rout that began Thursday.
Traders are seeking to find an appropriate valuation for tech stocks and gauge the health of the U.S. economy as the coronavirus pandemic rages on after having killed more than 180,000 Americans. While the industry is generating blockbuster profits during the stay-at-home lockdowns, there’s also evidence that high-flying names have become overheated.
“It’s definitely a top-heavy sell-off,” said Dan Russo, chief market strategist at Chaikin Analytics. “It’s those crowded names that were over-owned that are being sold again today. It’s the lofty valuations, the stocks just were stretched.”
Nonfarm payrolls increased by 1.37 million in August, including the hiring of 238,000 temporary Census workers, according to a Labor Department report Friday. The unemployment rate fell by almost 2 percentage points, to 8.4%.
Elsewhere, emerging-market stocks fell for a third day. Asian shares dropped, with Australia’s benchmark recording the biggest decline since May.
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