Dow tumbles 800 points on tech and economy woes

Technology stocks took a tumble on Wall Street Thursday, giving back some of their spectacular gains over the past several months and dragging the rest of the market down with them.

The S&P 500 closed down 3.5%, and the tech-heavy Nasdaq fell nearly 5%. Both indexes had set their latest record highs a day earlier, and the Nasdaq is still up about 30% for the year. The Dow slid nearly 1,000 points, or nearly 3%, before bouncing back to end just over 800 points down to about 28,300.

The S&P 500 had been up nine of the last 10 trading days and posted its fifth straight monthly gain in August. Thursday's market drop was the biggest decline since June 11, when coronavirus cases began surging across the nation.

Big Tech companies have posted outsized gains in recent months as investors bet that they would continue posting huge profits even with many coronavirus restrictions still in place as people spend even more time online with their devices. Market watchers have been questioning recently whether those gains were overdone.

"It's possible that today's market is an indication of things to come, where fundamentals play a larger part in valuations, as opposed to the irrational exuberance that has persisted in recent months within tech," said Peter Essele, head of portfolio management for Commonwealth Financial Network. "The lack off a broad selloff across all sectors shows that there's a good deal of 'hot money' chasing the large tech names, which can exit as quickly as it entered."

Apple's shares dropped more than $10.50, or 8%, to just under $121. The drop amounted to a loss of roughly $170 billion in market value. It was reported that the iPhone maker, which recently became the first public U.S. company to be valued at more than $2 trillion, plans to delay the release of its newest mobile operating software.

Facebook had said earlier that the operating system, which gives users more ability to opt-out of tracking, might not be supported by the social network because of concerns by advertisers. Amazon's shares also lost 5.6%, and Facebook gave back 4.6%.

Investors were also taking into account the latest economic figures. The government reported that the number of Americans who applied for unemployment benefits rose last week again. A gauge of the services sector also came in slightly worse than economists were looking for.

The stock market has rallied this spring and summer after plunging in March as investors realized the economic toll the coronavirus pandemic was going to cause. Most of the rally has been on strong performances from tech stocks, but also a hope that the worst of the pandemic is in the past, despite rising infections in schools and the possibility of a second surge of infections in the fall. Huge amounts of support from the Federal Reserve and Congress have also helped bolster the economy.

Novavax, which is developing a coronavirus vaccine, was up nearly 2% as investors placed bets that a vaccine could come as early as November.

Investors will be paying close attention Friday when the Labor Department releases its August job report. Economists surveyed by FactSet forecast that the U.S. economy created 1.4 million jobs in August, but that would be down from 1.74 million jobs in July. Tens of millions of Americans remain unemployed however, as seen by this week's unemployment benefits numbers.

A report by payroll processor ADP, widely watched as a forerunner of government employment data due out Friday, showed the private sector added 428,000 jobs in August, less than half the 1 million expected by forecasters.

If tomorrow's jobs numbers do not deliver, it's unlikely the stock market will rally much higher from here, analysts said.

Analysts said that could be a warning sign the job market is cooling after some U.S. states reimposed anti-virus controls and the expiration of supplemental unemployment benefits cut into consumer spending.

"Bullish stock market sentiment seems to be nearing a tentative peak as the labor market recovery stalls," analyst Edward Moya of Oanda wrote in a report.

U.S. crude oil for October delivery fell 2.4% to $40.52 a barrel. Brent crude, the international benchmark, fell 2.2% to $43.44 per barrel.