The Nasdaq plummeted Tuesday as investors dumped mega cap growth stocks and rotated into cyclical stocks. They sold off the likes of Alphabet, Apple, Amazon and Microsoft.
Spooking investors: uncertainty over the upcoming jobs report and concerns over rising interest rates.
Treasury Secretary Janet Yellen’s comments on the potential need for rate hikes to ensure the economy doesn’t overheat exacerbated the sell-off in tech stocks, which are sensitive to moves in rates.
DataTrek Research Co-Founder Nick Colas said Yellen seemed to be reenacting her old job as chair of the Federal Reserve.
“It was kind of strange to see her address it in her new role of Treasury. But I think the markets didn't like that very much. They really are hooked on keeping rates low.”
But rate increases benefit banks, which were among the day’s leading gainers along with other economically-sensitive sectors - materials and industrials.
The Dow ended just above break-even. But the S&P 500 lost two-third percent, and the Nasdaq dropped 1.9%.
A 4% rally in CVS shares helped curb the S&P’s loss. Quarterly profit breezed past analysts’ estimates, and the drug store operator raised its 2021 forecast for adjusted profit.
After the bell, shares of Lyft shot up 4%. The ride-sharing company significantly shrank its losses and reiterated its goal of becoming profitable on an adjusted basis in the third quarter.