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Dow down over 400 points, Nasdaq slumps 3% as tech rout continues

Investors on Tuesday picked up where they left off on Friday ahead of a U.S. three-day weekend, with a sharp fall in tech stocks pressuring major benchmarks.

Remarks by President Donald Trump on Monday, threatening to “decouple” the U.S. economy from China added to market jitters, analysts said.

What are major indexes doing?

The Dow Jones Industrial Average
DJIA,
-1.53%

dropped 453.88 points, or 1.6%, to 27,679.43, while the S&P 500
SPX,
-1.55%

gave up 71.44 points, or 2.1%, to trade at 3,355.52. The Nasdaq Composite
COMP,
-1.79%

slumped 349.18 points, or 3.1%, to 10,963.95. U.S. markets were closed Monday for Labor Day.

The tech-heavy Nasdaq Composite dropped 3.3% last week to end Friday at 11,313.13, its biggest weekly decline since March. The Dow Jones Industrial Average lost 1.8% last week, ending at 28,133.31, while the S&P 500 dropped 2.3% to 3,426.96 — the biggest weekly falls for those indexes since June.

What’s driving the market?

The major U.S. stock indexes fell last week, with the Nasdaq bearing the brunt, as previously highflying technology shares suffered a heavy bout of selling.

Read:Here’s why the Dow plunged last week and what’s ahead for stocks

The reversal for the Nasdaq, which had previously soared to a series of all-time highs, was led by falls for its highest-flying components, including Apple Inc.
AAPL,
-2.11%
,
Facebook Inc.
FB,
-1.55%
,
Microsoft Corp.
MSFT,
-2.50%

and Amazon.com Inc.
AMZN,
-1.69%

and Google parent Alphabet Inc.
GOOG,
-1.92%

GOOGL,
-1.86%

as worries grew that the momentum-led gains for the sector had finally pushed valuations too far to be sustained.

See:The only path to a sharply higher stock market ‘is a bubble like the late 1920s and 1990s,’ says analyst who called rally off March lows

Remarks by Trump in a Labor Day news conference left futures under pressure, analysts said.

“We will make America into the manufacturing superpower of the world and we’ll end reliance on China once and for all, whether it’s decoupling or putting in massive tariffs like I’ve been doing already. We’re going to end our reliance on China, because we can’t rely on China,” Trump said.

Meanwhile, China on Tuesday said it would launch an initiative of its own to set global standards on data security, a move seen as an attempt to counter U.S. efforts to isolate their networks from Chinese technology.

Trump’s comments “clearly rattled the markets, which fear an escalation of tensions between the two economic superpowers as the U.S. nears its election,” said Boris Schlossberg, managing director of FX strategy at BK Asset Management, in a note. “The increasing conflict could hurt the U.S. high tech sector the most with China already stating that it will try to create its own chip design and manufacturing business as it tries to rely less on the U.S. technological know-how.”

In coronavirus pandemic news, a group of nine drug company chief executives said Tuesday they have signed a pledge to make the safety and well-being of vaccinated individuals the top priority in developing the first COVID-19 vaccine.

Which companies are in focus?
  • Shares of Tesla Inc.
    TSLA,
    -12.27%
    ,
    a Nasdaq-100
    NDX,
    -2.10%

    component, fell more than 15% after a rebalancing of the S&P 500 by S&P Dow Jones Indices on Friday unexpectedly left the electric car maker out of the U.S. stock-market benchmark.

  • The rebalancing saw Catalent Inc.
    CTLT,
    +1.19%
    ,
    Etsy Inc.
    ETSY,
    +5.00%

    and Teradyne Inc.
    TER,
    -0.99%

    added to the index. 

  • Shares of Nikola Corp..
    NKLA,
    +40.42%

    soared 28% after the electric vehicle maker and General Motors Co. announced they had entered a strategic partnership that would start with the Nikola Badger, the company’s planned fully-electric and hydrogen fuel cell electric pickup truck, and include cost reductions for other models. GM shares were up 5%.

  • Shares of Boeing Co.
    BA,
    -4.16%

    were down 2.5% after The Wall Street Journal reported that production problems at a 787 Dreamliner factory prompted air-safety regulators to review quality-control lapses that could stretch back almost a decade.

How are other markets trading?

The yield on the 10-year Treasury note
TMUBMUSD10Y,
0.664%

TMUBMUSD10Y,
0.664%

fell 4.1 basis points to 0.679%. Bond prices move inversely to yields.

The ICE U.S. Dollar Index
DXY,
+0.63%
,
which tracks the performance of the greenback against its major rivals, was up 0.7%.

Gold futures
GCZ20,
-0.46%

were off 0.8% at $1,919.60 an ounce. U.S. crude oil benchmark futures
CL.1,
-7.69%

fell sharply, off more than 6%, on continued worries over the outlook for demand.

The Stoxx Europe 600 index
SXXP,
-1.41%

declined 1.8%, while the U.K.’s benchmark FTSE
UKX,
-1.38%

lost 0.8%. In Asia, Hong Kong’s Hang Seng Index
HSI,
+0.14%

rose 0.1% , while Japan’s Nikkei
NIK,
+0.79%

rose 0.8%.

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