The Nasdaq ended sharply lower on Thursday as the Federal Reserve’s announcement of a faster end to its pandemic-era stimulus pushed investors away from Big Tech and toward more economically sensitive sectors.
Nvidia Apple Microsoft, Amazon, and Tesla tumbled between 2.6 percent and 6.8 percent, hitting the Nasdaq and the S&P 500, while the Dow Jones Industrial Average declined marginally.
Most of those heavyweight growth stocks have outperformed the broader market in 2021, with Nvidia up more than 100 percent year to date.
The Dow Jones Industrial Average fell 0.08 percent to end at 35,897.64, while the S&P 500 lost 0.87 percent to 4,668.67.
The Nasdaq Composite dropped 2.47 percent to 15,180.44.
The U.S. central bank said on Wednesday it would end its bond purchases in March and signaled three quarter-percentage-point interest rate hikes by the end of 2022.
That pleased investors who have increasingly worried about an inflation spike related to the coronavirus pandemic. But on Thursday it contributed to the sell-off in growth stocks.
The S&P 500 value index climbed 0.7 percent, while the growth index fell 2.1 percent, reflecting investors’ views that high-growth stocks tend to underperform when interest rates rise. The value index includes stocks seen as more likely to do well during an economic recovery.
“You’re seeing money come out of growth, as it should. If we are going into an environment where interest rates are going up, growth stocks are going to be less attractive” said Dennis Dick, a trader at Bright Trading LLC.
“There’s a lot of uncertainty as we go into 2022... We’re going to have a more hawkish Fed that is going to pull away the punch bowl,” he said.
Among the 11 major S&P 500 sector indexes, technology slumped 2.9 percent, while financials rallied 1.2 percent. Eight of the sectors gained, even as the overall index fell.
“The Fed gave the market what it wanted, and today I think investors are turning again to pandemic uncertainty, and they’re also cautious going into the end of the year,” said Lindsey Bell, chief investment strategist at Ally Invest, in Charlotte, North Carolina.
Recent readings on surging producer and consumer prices, as well as the fast-spreading Omicron variant of the coronavirus, have fueled anxiety. The S&P 500, nonetheless, remains up about 25 percent in 2021 and it is trading near record highs.
The CBOE Volatility index, often considered Wall Street’s fear gauge, slipped to a three-week low.
Data showed the number of Americans filing new claims for unemployment benefits increased moderately last week, remaining at levels consistent with tightening labor market conditions.
Separately, a survey showed production at U.S. factories increased to the highest level in nearly three years in November.
Lennar Corp fell 4.1 percent after the homebuilder missed analysts’ estimates for quarterly profit as pandemic-led supply chain issues pushed lumber costs higher and delayed house deliveries.
Declining issues outnumbered advancing ones on the NYSE by a 1.03-to-1 ratio; on Nasdaq, a 1.93-to-1 ratio favored decliners.
The S&P 500 posted 69 new 52-week highs and 3 new lows; the Nasdaq Composite recorded 43 new highs and 184 new lows.
Volume on U.S. exchanges was 11.6 billion shares, in line with the average over the last 20 trading days.
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