The US tech sell-off on Wall Street extended to a third day on Tuesday, with electric carmaker Tesla among the biggest fallers suffering its worst day in nearly six months.
The tech-heavy Nasdaq stock market dropped over 4%, following similar falls on Thursday and Friday. Wall Street was closed on Monday for the Labor Day holiday.
Shares in Tesla fell 21% on Tuesday, while Apple was down 6.7% and Amazon down 4.3%.
Tesla, with Elon Musk as chief executive, has been one of the biggest winners of recent stock market rallies as investors have piled into tech firms during the pandemic. The company’s share price surged 74.1% in August alone and is up about 400% this year. The rise has made Tesla more valuable than some of the world’s largest automakers, including Toyota and Volkswagen.
The sharp sell-off came after S&P Global, the company behind the S&P 500 index of top US companies, passed over Tesla for inclusion in the index – a move that had been expected to give Tesla’s share price another boost as index-fund investors added the stock to their portfolios. Etsy, the online marketplace for homemade products was a winner, gaining a place in the index.
“Tesla was already under pressure at the back end of last week, so the S&P story has made matters worse,” said David Madden, analyst at CMC Markets. “Despite the recent aggressive sell-off, the stock is still up 325% year-to-date.”
All the major US stock markets were in the red on Tuesday, with the S&P 500 and the Dow down over 2%. While many traders see the sell-off in tech as a move by investors to take some profits after a historic boom, broader concerns about the US economy also appear to be worrying the markets.
Last week the US released new unemployment figures which suggest that the pace of recovery from the coronavirus recession is slowing. And over the weekend Donald Trump said he was looking to curb the US’s economic relationship with China, an announcement that could herald more trade disputes ahead.
“Typically, bubbles are unwound when the Fed takes away the punch bowl. Obviously, this is very unlikely to happen anytime soon,” Wolfe Research strategist Chris Senyek wrote on Tuesday. “However, this bubble can still be unwound by sustained economic disappointments.”
