Around midday, all three major indexes had bounced back from their morning lows but remained sharply in the red. The Dow was off by 1.7%, or more than 500 points, and the S&P down 2.4%.
Even so, the Nasdaq remains up nearly 30% in 2020, still far outpacing its counterparts.
“Although there is no single driver for the weakness, it seems as if investors all of a sudden realized how overbought stocks are and sold. Someone yelled fire in a crowded theater and everyone left at once,” said Ryan Detrick, chief market strategist for LPL Financial, in emailed comments.
But there are also technical reasons for Thursday’s decline: As US-China relations sour, investors are moving money out of tech, which could get hit the hardest from a potential increase in tariffs.
“The Nasdaq is getting hit hard with the continued rotation into cyclicals and expectations big-tech will ultimately pay the cost to a further deterioration with US-Chinese relations,” said Ed Moya, senior market analyst at Oanda.
Stocks in cyclical sectors are also expected to perform better as the economy is recovering.
Given the summer rally, it’s “perfectly normal,” to see tech stocks readjusting a bit, Detrick said.
And even investors who are still faithful to their safe tech holdings have reason to be a little concerned: Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious diseases, told CNN Thursday that a Covid-19 vaccine by October remained “unlikely,” though it was possible.