S&P 500 Just Had Its Biggest Drop Since May

Nasdaq drops 2.8% amid tech sell-off
By Newser Editors and Wire Services
Posted Sep 28, 2021 3:57 PM CDT
S&P 500 Just Had Its Biggest Drop Since May
Specialist Gregg Maloney works on the floor of the New York Stock Exchange, Tuesday, Sept. 28, 2021.   (AP Photo/Richard Drew)

Technology companies led a broad slide in stocks on Wall Street Tuesday as investors reacted to a surge in US government bond yields. The benchmark S&P 500 index had its worst drop since May, and the tech-heavy Nasdaq had its worst drop since March. The main action was again in the bond market, where a swift rise in Treasury yields is forcing investors to reassess whether prices have run too high for stocks, particularly the most popular ones, the AP reports. The S&P 500 fell 90.48 points, or 2%, to 4,352.63. The Dow Jones Industrial Average fell 569.38 points, or 1.6%, to 34,299.99. The Nasdaq fell 423.29 points, or 2.8%, to 14,546.68. The Russell 2000 index of smaller companies fell 51.23 points, or 2.2%, to 2,229.78.

The yield on the 10-year Treasury note jumped to 1.54%, its highest level since late June. That’s up from 1.32% a week ago. A rise in yields means Treasurys are paying more in interest, and that gives investors less incentive to pay high prices for stocks and other things that are riskier bets than super-safe US government bonds. Many tech stocks also got bid up recently on expectations for big profit growth far in the future. When interest rates are low, an investor isn’t losing out on much by paying high prices for the stock and waiting years for the growth to happen. But when Treasurys are paying more in the meantime, investors are less willing.

The recent upturn in rates has hit tech stocks particularly hard because their prices look more expensive than much of the rest of the market, relative to how much profit they’re making. Chipmaker Nvidia fell 4.5%, Apple slid 2.4% and Microsoft fell 3.6%. Facebook fell 3.6% and Google's parent company, Alphabet, fell 3.7%. The broader technology sector has also been contending with a global chip and parts shortage because of the pandemic. The shortage could get more severe as a power crunch in some parts of China shuts down factories. (Read more stock market stories.)

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