The S&P 500 gave up earlier gains and closed in the red Wednesday as tech stocks sold off, continuing a market rotation out of high-flying growth names.
The market suffered an ugly close where the declines in technology shares accelerated, dragging down the major averages in a rapid fashion in the final minutes. The S&P 500 fell 0.6% to 3,889.14 after rising as much as 0.8%. The tech-heavy Nasdaq Composite dropped 2% to 12,961.89, closing at its session low. Apple, Facebook and Netflix all slid more than 2%, while Tesla fell 4.8%.
The Dow Jones Industrial Average dipped into the red in the final seconds of the session, closing 3.09 points lower at 32,420.06. The blue-chip benchmark jumped more than 300 points at its session high.
Classic reopening plays like airlines and cruise operators rolled over in afternoon trading. Shares of cruise operators fell to session lows after Centers for Disease Control and Prevention said the sailing order limiting cruises will stay in place until Nov. 1. Norwegian Cruise Line dropped 4.9% following the news, while Royal Caribbean and Carnival fell 1.9% and 2.8%, respectively. Delta and United Airlines also ended the day lower.
The tech sell-off came even as bond yields continued to decline from recent highs. The 10-year Treasury yield dipped 3 basis points to 1.61% Wednesday, falling for a third day after the rate hit a 14-month high last week.
One bright spot on Wednesday was the energy sector, which gained 2.5% as oil prices bounced back 6%. The material and financial sectors also outperformed, rising about 0.7% each.
“Stocks encountered volatility but powered ahead in the first quarter. Cyclical stocks — those sensitive to economic momentum — continued to lead,” said Tony DeSpirito, chief investment officer of U.S. fundamental equities at BlackRock. “We think it makes sense to position for the start of a new and powerful economic cycle.”
On Wednesday, Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen appeared for a second day for virtual Capitol Hill testimony. Talking with members of the Senate Banking Committee, Powell said he expects the economy to experience superior growth in 2021 amid a recovery from the pandemic.
“There’s going to be a very, very strong year in the most likely case,” Powell said. “There are of course risks to the upside and downside, but it should be a very strong year from a growth standpoint…Longer run we do have to raise revenue to support permanent spending that we want to do.”
Shares of Intel wiped out earlier gains and fell more than 2% even after the chip giant unveiled plans for a comeback. The firm said it would open two new factories to manufacture chips for its own use and for other companies.
Investors are on edge as many regions of the world are seeing rising Covid-19 cases as highly contagious variants continue to spread . Germany and France are extending or enforcing new lockdown measures.
Still, expectations for a successful reopening in the U.S. remain high as the pace of vaccinations in the country is picking up with nearly one in five adults now fully vaccinated.
“The bull case for equities is persuasive in a recovering economy,” Oliver Brennan, head of research at TS Lombard, said in a note. “Earnings expectations have caught up with the pre-crisis level; risk here remains to the upside.”
— CNBC’s Jeff Cox contributed reporting.