U.S. Stocks Fall Amid Decline in Tech Shares – The Wall Street Journal

The S&P 500 lost 3.5% to 3455, while the tech-heavy Nasdaq Composite slid 5% to 11458.

Big technology companies, including Facebook and Apple Inc., were leading the declines Thursday, contributing to the pressure on Nasdaq. Facebook fell more than 4% and Apple lost nearly 7%, a drop mitigated by its stock split in August. Amazon.com Inc., meanwhile, lost 5.4%.

Big technology firms have been among the leaders in the broad market rebound. Overall, stocks have soared since March despite the worst economic slump in decades and the novel coronavirus’s continued hold even in some countries that had previously showed success in quashing it, confounding investors.

The decline on Thursday indicates the rally may not continue unabated, investors said.

Holly MacDonald, investment chief of New York-headquartered multi-family office Bessemer Trust, said the sell-off represented something of a return to more normal conditions and wasn’t entirely unexpected given the August gains. She also said she expected a pickup in volatility going into the fall.

“As the market continues to digest the news related to Covid, the vaccine, the election, there are going to be sessions where you don’t see that degree of strength,” Ms. MacDonald said.

On the economic front, fresh data showed that, seasonally adjusted, 881,000 Americans applied for unemployment benefits for the first time through the week ended Aug. 29. Unemployment claims have continued to edge lower but remain near historic highs, signaling layoffs continue as the coronavirus hampers the economic recovery.

The uptick in market volatility could be due to a large number of call options, which confers the right to buy shares, on technology stocks such as Apple and Tesla, according to Saxo Bank. Market makers have been forced to take the other side of such trades, buying the underlying stocks to hedge their positions.

U.S. stock options trading has been driven by Robinhood traders, said Peter Garnry, head of equity strategy at Saxo Bank. If shares in a stock fall enough, market makers will unwind their shares, causing a sharp selloff.

“Over the past few months we’ve had really quite a strong recovery, and that has started to stall,” said Andrew Hunter, senior U.S. economist at Capital Economics.

Federal Reserve official Mary Daly became the latest policy maker to call for renewed fiscal stimulus Wednesday, saying that reduced government spending measures could slow the economic recovery. Economists have worried that the expiration of extra unemployment benefits that kept households afloat could trigger a drop in consumer spending.

Senate Majority Leader Mitch McConnell raised a question Wednesday as to whether lawmakers could reach an agreement on a new spending package in the next few weeks. Investors have been betting on Republicans and Democrats striking a deal later this month to offer additional relief to U.S. consumers and businesses, after talks stalled in August.

Renewed tensions between Beijing and Washington also remain a risk for markets. The Trump administration signaled plans to impose new restrictions on Chinese diplomats in the U.S., citing Beijing’s use of similar measures on American envoys. The Chinese embassy in Washington responded by accusing the U.S. of violating international conventions, characterizing the fresh restrictions as unjustified and urging the country to reconsider.

“The U.S. election is clearly drawing closer, the U.S.-China trade war is not put to bed, so there are huge uncertainties for the market,” said Altaf Kassam, head of investment strategy for State Street Global Advisors in Europe. “Frankly, we’ve just had an amazing run up and the market does need to pause for breath.”

The government’s efforts regarding a coronavirus vaccine have left some investors concerned that the issue is becoming a campaign weapon, which may discourage people from having the shot when it is ready because of safety concerns or political views. The Centers for Disease Control and Prevention urged states to speed up approval for vaccine distribution sites by Nov. 1, which is just days before the presidential election.

In bond markets, the yield on the 10-year Treasury ticked down to 0.649%, from 0.650% Wednesday. Yields fall when prices rise.

“Central banks have had a massive impact on the financial markets,” Mr. Zahn said. “We had that big selloff in March and we’ve seen quite a big rebound.”

Overseas, the pan-continental Stoxx Europe 600 climbed 0.7%. Markets in Asia ended the day on a mixed note, with the Shanghai Composite closing down 0.6% while South Korea’s Kospi added 1.3%.

The Turkish lira hit a record low Thursday, with $1 buying 7.4535 lira, after the main inflation gauge remained unchanged between July and August, but the cost of food and transportation rose. The central bank has spent billions of dollars stemming the fall of the lira this year, worried that a weaker currency would boost inflation.

In commodities, Brent crude oil fell 1.9% to $43.56 a barrel and U.S. crude futures declined 2% to $40.66 a barrel. The move follows five straight weeks of gains for crude, likely prompting some profit-taking, according to Commerzbank.

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Juliet Chung at juliet.chung@wsj.com