NEW YORK – Big technology stocks tumbled again Tuesday, continuing the path for companies that just a week ago were the high-flyers carrying Wall Street to record heights.
The S&P 500 fell 95.12, or 2.8%, to 3,331.84 and clinched its first three-day losing streak in nearly three months.
Big names that were the main reasons for the market’s rocket ride back from its pandemic-caused losses were among the heaviest weights. Apple sank 6.7%, Microsoft pulled 5.4% lower and tech stocks across the index were down 4.6%.
The Dow Jones Industrial Average lost 632.42 points, or 2.2%, to 27,500.89. The Nasdaq composite, which is packed with tech stocks, dropped 465.44, or 4.1%, to 10,847.69 and is down 10% since it set its latest record Wednesday.
Tech stocks had been the darlings of Wall Street on expectations that they can continue to deliver strong profit growth almost regardless of the economy and global health. Tech stocks in the S&P 500 are still up nearly 23% for 2020 so far, and Amazon has rocketed 70.5%, even when unemployment remains high and much of the economy is limping ahead.
Analysts say a flurry of activity for stock options of big tech companies goosed the gains even further recently. With certain kinds of options, investors can make huge profits on a stock without having to pay for its full share price, as long as the stock’s price keeps rising. If enough of these kinds of stock options are getting sold, it can create a buying frenzy for the stock that accelerates the gains.
But all that activity can unwind quickly and send prices tumbling if momentum turns, which is what happened last week. Apple stock dropped 3.1% for just its second weekly loss in the last 14 weeks.