Daily Outlook

Nasdaq falls more than 2%, Dow drops 400 points

Stocks fell sharply on Tuesday to start the week as technology shares were under pressure following their worst sell-off in more than five months last week. The Nasdaq Composite dropped 2.5% and the Dow Jones Industrial Average plunged 400 points, or more than 1%. The S&P 500 slid 1.8%. At one point, the Nasdaq had fallen more than 3% and the Dow fell as much as 600 points.

Tesla plunged 16% after the S&P Dow Jones Indices failed to add the surging and speculative stock to the S&P 500 after the bell Friday. Investors were betting on inclusion of the stock into the S&P 500, hoping for the stamp of approval on the rally by S&P. The snub shows the risks to the overheating Nasdaq trade.

Other hot Nasdaq stocks were hit hard. Facebook, Amazon, Microsoft, and Google-parent Alphabet were all down more than 2%. Apple was down 3.3%, but briefly pared some of its losses after the tech giant announced an event on Sept. 15. Zoom Video fell by 2%.

Many on Wall Street believe the weakness derived from worries that the massive tech run-up pushed valuations to unsustainable levels. Even with last week’s pullback, the Nasdaq is up more than 70% from its March bottom.

Last week’s Big Tech slump coincided with outperformance in cyclical stocks — names most sensitive to the economic recovery. The S&P 500 materials and financials sectors were the two biggest winners in the prior week, up 2.3% and 0.9%, respectively.

Geopolitical developments also weighed on investor sentiment Tuesday. China accused the U.S. of “bullying” as it launched a global data security initiative on Tuesday. That came as Washington continues to pressure China’s largest tech firms and convince countries around the world to block them. President Donald Trump also recently entertained the idea of “decoupling” from China, or refusing to do business with the country.

Nasdaq falls more than 2% as tech plunges once again, Dow drops 400 points, CNBC, Sep 8

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