Nasdaq falls nearly 3% as tech selling accelerates with about an hour left to the close

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Jesse Pound@JESSERPOUND Tanaya Macheel@TANAYAMAC

U.S. stocks stumbled on Thursday as weakness among large tech stocks dragged down major market averages.

The S&P 500 was down 1.1% after closing just below a record in the previous session, while the Nasdaq Composite dropped 2.8%. The Dow Jones Industrial Average fell 109 points after being up more than 200 points earlier in the session.

Thursday’s trading action was marked by struggles for some large tech names, with Apple falling more than 4% and major semiconductor stocks like AMD and Nvidia dropping 5.8% and 7.3%, respectively. Shares of Adobe fell after the company’s forward guidance came in lower than analysts expected.

The Nasdaq fell more than 1% on Monday and Tuesday and is now down over 3% for the week. Frank Gretz, a technical analyst at Wellington Shields, said that the market appears to be in a leadership rotation from high-growth tech names to other areas, such as consumer staples.

“I think the main thing I’m focused on is the change in leadership. I think this is more than just temporary,” Gretz said.

Still, he said he didn’t recommend investors getting out of highly profitable tech stocks even though they have struggled this week.

“The market has a tendency in these declines to get around to everything. I think [the market] selling Microsoft and Apple is almost a positive sign, because they’re getting around to everything,” Gretz added.

Bank stocks helped the Dow hold up better than its counterparts, with Goldman Sachs rising 1% and JPMorgan adding 1.4%. Shares of Verizon jumped more than 4% to be one of the best performers in the Dow.

Thursday’s moves came a day after stocks rallied in the previous session as the Federal Reserve announced a more aggressive plan to wind down its asset purchases and hike rates in 2022. The Fed on Wednesday announced that it would accelerate its taper of asset purchases. The central bank also said its members expected three rate hikes in 2022.

“I think what the market was looking for more than anything was certainty … It got that yesterday. There was a lot of bearish sentiment that was building up in the market,” said Don Calgani of Mercer Advisors.

Investors were also keeping an eye on the rise of the omicron variant of Covid-19. Calgani said that the rise of omicron variant could serve as a “get out of jail free card” for Powell to move back to a more dovish stance if the economic recovery falters.

In other central banking news, the Bank of England announced on Thursday that it is hiking its key policy rate by 15 basis points to 0.25%. However, the European Central Bank signaled that it did not expect rate hikes next year.

On the economic data front, weekly jobless claims came in slightly higher than expected, while housing starts for November were much stronger than economists projected after declining in the prior month.