Stocks fell once again on Friday as a sell-off in tech, the best-performing market sector in 2020, continued for a second day.
The Dow Jones Industrial Average fell 362 points, or 1.3%. Earlier in the day, the Dow was up more than 200 points. The Nasdaq Composite dropped 3.9% and the S&P 500 slid 2.2%. Over the past two days, the Nasdaq has fallen by more than 8%.
Apple shares dropped 6% and Facebook slid 4.9%. Amazon and Netflix both fell more than 4% and Alphabet dipped 3.9%. Microsoft slid 4%.
Wall Street was coming off a massive sell-off that was sparked by a plunge in tech stocks. On Thursday, the S&P 500 tech sector suffered its biggest one-day drop since March. Tech’s sell-off after the space drove the lion’s share of the broader market’s comeback off the coronavirus sell-off lows. Since March 23, the S&P 500 tech sector is up about 70%. For the year, tech has rallied more than 30%.
“We’ve had excessive valuations in the markets lately — particularly in the tech sector — and that needed to be corrected to some degree,” said Scott Knapp, chief market strategist at CUNA Mutual Group. “One needs to look no further than the recent irrational run-up in Tesla and Apple share prices after both companies announced a stock split to see overexuberance, especially among retail investors.”
Both Tesla and Apple rallied recently after announcing stock splits.
To be sure, more beaten-down parts of the market rebounded Thursday and added to those gains Friday. Cruise operator Carnival advanced 2.6% on Friday. United Airlines rose about 1%.
“We might finally see some rotations that could lead to new market leadership,” said Peter Cardillo, chief market economist at Spartan Capital Securities. “That’s something we’ve been lacking for a long time.”
The U.S. unemployment rate fell to 8.4% last month from 10.2% in July, the Labor Department said. Economists polled by Dow Jones expected the rate to decline to 9.8%. As for overall jobs creation, employment in the U.S. grew by 1.37 million in August, topping an estimate of 1.32 million.
“The jobs data today were solid,” said Jamie Cox, managing partner at Harris Financial Group. “However, now the real work begins.”
“The next 2-3% of employment gains are going to be very tough because there is no total re-opening in sight. PPP funds are running dry and the impasse in Congress to reauthorize another round for struggling small businesses most affected by the pandemic are recipes for a wave of small business closures,” Cox said.
Bank stocks rose following the data release as Treasury yields climbed. Citigroup, Bank of America and JPMorgan Chase were all up at least 1.4%. Wells Fargo climbed 1%. The benchmark 10-year Treasury yield rose to 0.66%. The 30-year bond rate advanced to 1.4%.