Stocks Close Sharply Lower, Led by Tech Shares

U.S. stocks tumbled Thursday as a wave of selling spread beyond the technology sector, taking down swaths of the market.

The Dow Jones Industrial Average, as of 4 p.m. ET, dropped 561 points, or 1.8%, after closing Wednesday at an all- time high. The S&P 500 shed about 2.5%, and the Nasdaq Composite lost 3.5%.

Stocks' momentum has faltered the past week as investors have faced a sharp and swift rise in bond yields. Money managers have broadly attributed the shift to bets on the economy picking up, something that should be a boon to corporate profits. But the swiftness with which yields have moved has also had another effect: It has tempered enthusiasm for more richly valued, risky parts of the market.

Investors rushed out of some of the hottest stocks of the year, sending shares of companies like Apple, Alphabet and Netflix down.

While relatively cheap corners of the market appeared to hold up well at first, with bank stocks and energy producers initially higher for the day, those gains dwindled in afternoon trading.

The KBW Nasdaq Bank Index of 24 lenders slipped 1.8%, wiping out all of its earlier advance.

"The market is jittery. The bond yields' rising is putting equities, especially growth stocks, under pressure," said Sebastien Galy, a macro strategist at Nordea Asset Management. "There is a bit of a risk reduction broadly."

One group of stocks that bucked the trend: "meme stocks" that have surged in popularity among individual investors this year.

In a wave of volatility reminiscent of last month's rally, GameStop jumped 59%, while AMC Entertainment hovered around flat. The two stocks had soared in overnight trading.

The moves show "there is still liquidity and a lot of access to speculative bets," said Sophie Chardon, cross asset strategist at Lombard Odier. "We have to be prepared to live with this kind of targeted bubble, but I wouldn't see it as a threat to the global equity market."

Meanwhile, government bond prices fell, with the yield on the benchmark 10-year Treasury note rising to 1.513% from 1.388% Wednesday.

"The rise in yields is supportive for banks; higher oil prices are supportive for energy. It is a change of leadership," Ms. Chardon said.

Overseas, the pan-continental Stoxx Europe 600 edged down 0.4%.

Among individual equities, beer maker Anheuser-Busch InBev fell almost 6% after its fourth-quarter profit came in below estimates.

British packaging company DS Smith jumped 5.7% on reports that rival Mondi is exploring a takeover.

Investors have also been selling European government bonds in recent weeks as they look for higher returns. The yield on French 10-year bonds, which moves inversely to the price, ticked up above zero for the first time since June and reached as high as 0.024%.

In Asia, most major benchmarks finished the day up.

The Shanghai Composite Index added 0.6%, snapping a three-day losing streak, and Hong Kong's Hang Seng Index climbed 1.2%.

South Korea's Kospi Index rallied 3.5% after its central bank kept interest rates at historic lows, citing a need to continue supporting the country's economy.

Write to Anna Hirtenstein at anna.hirtenstein@wsj.com and Akane Otani at akane.otani@wsj.com


  (END) Dow Jones Newswires
  02-25-21 1618ET
  Copyright (c) 2021 Dow Jones & Company, Inc.

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