Tech shares tumbled anew on Monday, sending the Nasdaq composite index down 11% from its all-time high, as investors fled high-valuation stocks for companies whose fortunes are closely tied to the economic cycle.
The benchmark for megacap tech dropped 2.4% and is now at the lowest since November.
The S&P 500 ended lower after rising as much as 1% as tech shares in the gauge dropped 2.5%. Financial firms and materials producers kept losses from being worse. The Dow Jones industrial average hit an all-time high before settling for a 1% gain, buoyed by rallies in banks and Walt Disney Co. Tesla Inc. pushed its five-day rout past 20%. Blank-check companies backed by Chamath Palihapitiya tumbled.
Because of their huge size, the drops in Apple, Google’s parent company, and other major technology stocks pulled the S&P 500 to a loss of 0.5% Monday even though more stocks rose than fell in the index.
Technology companies have been sliding in recent weeks as investors start to doubt whether the huge gains they made during the pandemic months can continue. Treasury yields rose again.
The S&P 500 fell 20.59 points, or 0.5%, to 3,821. The Dow Jones industrial average rose 306.14 points, or 1%, to 31,802.44. The Nasdaq fell 310.99 points, or 2.4%, to 12,609.16. And the Russell 2000 index of smaller companies rose 10.77 points, or 0.5% to 2,202.98.
The 10-year Treasury rate jumped toward 1.6%, while the dollar strengthened. Brent crude briefly traded near $70 a barrel before pulling back. Gold slumped and Bitcoin traded above $51,000.
Investors embraced the prospect for a surge in global economic growth as vaccine distribution improves and the U.S. heads toward passing a $1.9 trillion spending bill. The risks associated with rising Treasury yields remain an overhang amid fears that government aid programs could overheat economic growth.
“You will see a lot of volatility in markets,” Kim Stafford, Asia Pacific head at Pacific Investment Management Co., said on Bloomberg Television. “We believe that confidence is improving, especially with vaccines coming online, so we will see an uptick in growth globally. There are a lot of reasons to be confident in the market, but a lot of this is also priced in.”
There are also questions about whether equity valuations have become excessive, especially in speculative tech shares. The Nasdaq has fallen about 8% since early February.