NEW YORK (Reuters) – Major U.S. stock indexes tumbled on Friday, dragged by losses in tech heavyweights that had been priced for perfection, and a record rise in coronavirus cases fed the glum mood along with presidential election jitters.
The three main indexes headed toward their worst week since the market’s lows in March on prospects of wider COVID-19 restrictions in Europe, while surging U.S. cases pushed hospitals to the brink of capacity.
The CBOE volatility index held at a 20-week high, a sign of jitters ahead of the final weekend before Election Day on Tuesday.
“We’re two market days away from Election Day and people want to make sure that they’re not completely caught off guard,” said Pete Santoro, a Boston-based equity portfolio manager at Columbia Threadneedle.
The S&P 500 has fallen about 9.4% since hitting an all-time high in early September in a rally driven by the tech mega caps whose quarterly results this week failed to meet optimistic expectations.
Apple Inc tumbled about 6.1% after it posted the steepest drop in quarterly iPhone sales in two years due to the late launch of new 5G phones.
Amazon.com Inc fell 5.48% after it forecast a jump in costs related to COVID-19, while Facebook Inc shed 7.04% as it warned of a tougher 2021.
“All these names are eventually going to be repriced, they’re all ridiculously valued. It’s just that I don’t know when and I don’t know from what stratospheric valuation they inevitably reprice,” said David Bahnsen, chief investment officer at The Bahnsen Group in Newport Beach, California.
Communication services got a boost from a 3.6% jump in shares of Alphabet Inc after the Google parent beat estimates for quarterly sales as businesses resumed advertising.
Google may have benefited as it has been trading at about 36 times earnings, far less than the 119 times earnings valuation of Amazon, Bahnsens said.
“There is a big selloff in those big tech names because they didn’t live up to the hype and people are really worried about next week’s election,” said Kim Forrest, chief investment officer at Bokeh Capital Partners in Pittsburgh.
Republican President Donald Trump has consistently trailed Democratic challenger Biden in national polls for months, but polls have shown a closer race in the most competitive states that could decide the election.
At 2:31 p.m. ET, the Dow Jones Industrial Average fell 432.05 points, or 1.62%, to 26,227.06. The S&P 500 lost 67.47 points, or 2.04%, to 3,242.64 and the Nasdaq Composite dropped 337.07 points, or 3.01%, to 10,848.53.
The third-quarter earnings season is almost past its halfway mark, with about 86.2% of S&P 500 companies topping earnings estimates, according to Refinitiv data. Overall, profit is expected to fall 10.3% from a year earlier.
Twitter Inc slumped about 21.1% after the micro-blogging site added fewer users than expected and warned the U.S. election could affect ad revenue.
Declining issues outnumbered advancing ones on the NYSE by a 2.60-to-1 ratio; on Nasdaq, a 3.07-to-1 ratio favored decliners.
The S&P 500 posted three new 52-week highs and one new low; the Nasdaq Composite recorded 18 new highs and 71 new lows.
Reporting by Herbert Lash, with additional reporting by Medha Singh, Shivani Kumaresan and Susan Mathew in Bengaluru; Editing by David Gregorio, Arun Koyyur, Anil D’Silva and Shounak Dasgupta