US STOCKS-Nasdaq plunges more than 2% as investors dump growth stocks

  • Reuters
  • Stock Market News
US STOCKS-Nasdaq plunges more than 2% as investors dump growth stocks
Credit: © Reuters.

* All 11 S&P 500 sectors trading in the red

* CVS Health gains after raising 2021 profit view

* Indexes down: Nasdaq 2.73%, S&P 1.34%, Dow 0.69% (Updates prices to early afternoon)

By Shreyashi Sanyal and Sruthi Shankar

May 4 (Reuters) - The Nasdaq fell more than 2% on Tuesday as steep declines in megacap growth stocks pushed Wall Street below record trading levels, with investors seeking shelter in more defensive parts of the market.

Highly valued technology companies including Microsoft Corp MSFT.O , Alphabet Inc GOOGL.O , Apple Inc AAPL.O , Amazon.com Inc AMZN.O and Facebook Inc FB.O fell between 2.3% and 4.2%.

All the 11 major S&P 500 sectors were down, with technology .SPLRCT , communication services .SPLRCL and consumer discretionary .SPLRCD falling more than 2% each.

The defensive consumer staples .SPLRCS , utilities .SPLRCU and real estate .SPLRCR sectors fell the least.

"When you're at all-time highs and the market pulls back, the ones that tend to lead to the downside are often the high-beta stocks such as technology," said Randy Frederick, vice president of trading and derivatives for Charles Schwab (NYSE: SCHW ) in Austin, Texas.

"When we have pauses or pullbacks people tend to move out of growth stocks into more defensive names."

Fiscal stimulus, rapid vaccinations and the Federal Reserve's accommodative stance have spurred a strong rebound in the U.S. economy and pushed Wall Street to record highs this year. The so-called "pandemic winners", however, have recently started to fall out of favor.

U.S. and European stock markets also saw a sudden 0.5% drop in hefty volumes around 7:30 a.m. ET on Tuesday, leaving traders perplexed. 11:49 a.m. ET, the Dow Jones Industrial Average .DJI was down 235.73 points, or 0.69%, at 33,877.50, the S&P 500 .SPX was down 56.17 points, or 1.34%, at 4,136.49 and the Nasdaq Composite .IXIC was down 379.74 points, or 2.73%, at 13,515.38.

Among other stocks, CVS Health Corp (NYSE: CVS ) CVS.N gained 3.7% after reporting a first-quarter profit above analysts' estimates and raising its 2021 forecast. earnings have been largely upbeat. Average profits at S&P 500 companies are expected to have risen 47.7% in the quarter, compared with forecasts of a 24% growth at the start of April, according to IBES data from Refinitiv.

Investors are also awaiting data through the week, including the Labor Department's monthly non-farm payrolls, due on Friday. The report is expected to show a rise in job additions in April.

Declining issues outnumbered advancers for a 2.37-to-1 ratio on the NYSE and for a 4.03-to-1 ratio on the Nasdaq.

The S&P index recorded 69 new 52-week highs and no new low, while the Nasdaq recorded 66 new highs and 87 new lows.

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