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| Tech stocks plunge as Nasdaq enters correction territory |
After multiple Big Tech firms disappointed on earnings, the Nasdaq composite index fell further and is now down 10 percent from the record it set last month.
3 min
Traders gather at the post of specialist Stephen Naughton, right, on the floor of the New York Stock Exchange, Friday, Aug. 2, 2024. (Richard Drew/AP)
By Aaron Gregg
Updated August 2, 2024 at 4:02 p.m. EDT|Published August 2, 2024 at 3:51 p.m. EDT
Stocks sold off sharply Friday as the tech-heavy Nasdaq composite index entered correction territory, pulled downward by economic worries and poor earnings from some leading companies.
The Nasdaq was down about 418 points for a drop of 2.4 percent for the day as trading drew to a close for the week, bringing it about 10 percent below its early July record high. The Dow Jones Industrial Average lost around 611 points, or 1.5 percent, while the broader S&P 500 shed 100 points for a 1.8 percent decline.
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The sell-off marks the second day in a row of significant declines and caps a bruising week for Wall Street. Just weeks earlier, all three indexes notched all-time highs as a tech-led rally seemed to be broadening.
“We were just too exuberant, and we were setting ourselves up for a disappointment,” said Sam Stovall, chief investment strategist at CFRA Research.
The disappointment came in the form of one-two-punch of bad financial earnings and unexpectedly weak economic data.
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The Labor Department reported Friday that the unemployment rate spiked to 4.3 percent and employers added 114,000 jobs in July, a weaker showing than had been expected. A day earlier the number of Americans seeking first-time unemployment spiked, and a closely watched gauge of the manufacturing sector also gave observers cause for concern.
“Couple that with the unemployment report this morning, and consumer demand seeming to dry up, and you are hit with the hard reality that the main driver of our economy is beginning to slow in a meaningful way,” said Alex McGrath, chief investment officer with Greenville, N.C.-based NorthEnd Private Wealth.
Worries about the economy have intensified concerns that a recent rally in tech stocks may have gone too far, with some investors now hedging their bets. Although the Nasdaq is still up 20 percent compared to where it was a year ago, some of the blue-chip tech stocks that drove the market to new heights are now showing signs of trouble.
Chip manufacturer Intel said it will lay off 15 percent of its staff in a wide-ranging cost-cutting campaign. The company’s stock dived 26 percent as it reported a $1.6 billion net loss in the quarter.
Amazon’s stock fell almost 9 percent Friday as its executives pointed to “cautious consumers” that played into its relatively soft sales numbers.
Even Nvidia and Microsoft — often described as the darlings of the stock market’s AI-driven rally — have been down about 12.5 percent and 11 percent respectively over the past month.
Still, several analysts said they thought the stock market downturn could be short-lived.
“You get a little bit of irrational fear in a room where everyone is sitting on profits, [it becomes] easy to take profits,” said Michael Farr of the D.C.-based investment firm Farr, Miller and Washington.
Farr noted that the Nasdaq index and broader tech sector, while currently in correction, have blown away analysts’ expectations all year and were due for a pullback.
Dan Ives, a Wedbush analyst who has been bullish on artificial intelligence, said he views the Friday sell-off as a “white-knuckle moment” for tech stocks, but not something that should raise fears of longer-term problems.
“This is not the time to panic on the tech trade, it’s the time to go bargain hunting for our top tech names after this panic sell-off,” Ives said in a note to investors.
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By Aaron Gregg
Aaron Gregg is a business reporter for the Washington Post. Twitter
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