Tech shares tumble as US stocks retreat from records

Wall Street stocks suffered steep declines Thursday, giving back some of the gains from a torrid August as investors cashed in amid worries about a bubble in prices.

The tech-rich Nasdaq Composite Index led the market lower following a sell-off in tech shares, losing 5.0 percent to end at 11,458.10.

The Dow Jones Industrial Average shed 2.8 percent to finish at 28,292.73, while the broad-based S&P 500 tumbled 3.5 percent to 3,455.06.

The market was “overbought and due for a pullback,” said Quincy Krosby, chief market strategist at Prudential Financial, who noted that September has historically been a bad month for the stock market.

Major indices enjoyed their best August in decades this year amid expectations that coronavirus vaccines and therapeutics will permit a strong economic recovery.

But analysts have cautioned that the market was due for a pullback given elevated unemployment as the US continues to contend with the coronavirus pandemic.

Major tech companies went on a tear in recent weeks, leading the market higher, but were among the biggest losers in Thursday’s session, with Apple shedding 8.0 percent,  Google-parent Alphabet losing 5.0 percent and Tesla 9.0 percent.

The sell-off came after mixed US economic data Thursday that included a report showing slower services sector growth in August, a bigger-than-expected drop in new jobless claims, record job cuts this year, and an unexpectedly big trade deficit for July.

The reports come ahead of Friday’s much-anticipated government jobs report for August, which economists expect to show a surge in hiring and a dip in the unemployment rate to below 10 percent.

The rally has been propelled by expectations for strong earnings growth in 2021 following fiscal and monetary stimulus measures.

But while that outlook may be promising, US unemployment remains exceptionally high following a historic drop in second-quarter growth in the aftermath of coronavirus closures and some analysts warn the market’s surge is divorced from economic fundamentals.