Wall Street’s run of record highs has come to an abrupt stop following a 3-day slide in tech stocks.
The sharp sell-off that began last Thursday has wiped out nearly 7.1% from the S&P 500 as of Tuesday.
The Nasdaq composite, home to Apple, Amazon, Zoom, Tesla and many other tech stocks that led the market’s remarkable five-month comeback from its lows in March, has lost more than 10% after setting an all-time high just four days ago.
Analysts have said that a correction in the markets was overdue.
Investors’ craving for technology companies was fueled by low interest rates, customers stuck at home while the pandemic raged, and efforts by the U.S. government to support out-of-work Americans.
The Federal Reserve has also added a boost by taking unprecedented actions to keep markets running smoothly and also encourage borrowing by keeping interest rates extremely low.
Between March 23 and Sept. 2, the Nasdaq jumped 75% while outpacing the S&P 500′s 60% gain and the Dow industrials’ 56.5% rally during the stock market’s rebound from its pandemic lows.
Even with the recent pullback, tech stocks are still leading the other 10 sectors in the S&P 500 with a gain of just under 23% so far this year.
Market watchers have been increasingly raising concerns that the market’s gains were too concentrated in technology companies, driving their valuation to levels that started to sound frothy even factoring in the most optimistic outlooks for company earnings growth next year.
The timing of the sell-off coincided with fresh concerns that interest rates could move higher after the Fed signaled that it may allow inflation to heat up. That, plus growing unease over the election outcome, may have given investors a green light to pocket some of their recent gains.
The Associated Press contributed to this article.