Stocks fell on Tuesday as a rally in mega-cap tech shares lost steam and concerns about the coronavirus outbreak dampened investor sentiment.
The S&P 500 slid 1.1% to 3,145.32 while the Nasdaq Composite, which hit a record high earlier in the day, closed 0.9% lower at 10,343.89. The Dow Jones Industrial Average dropped 396.85 points, or 1.5%, to 25,890.18.
Shares of Amazon fell 1.9% to lead tech lower. Netflix closed 0.1% lower after hitting a record earlier in the day. Microsoft, Apple and Facebook ended the session off their highs.
Both the Nasdaq and S&P 500 snapped five-day winning streaks. The Dow posted its first decline in three sessions.
“This market is way overbought,” said Peter Cardillo, chief market economist at Spartan Capital Securities. “This market has been ignoring the potential problems that are going to arise from the coronavirus.”
Stocks tied to the economy reopening from the coronavirus shutdowns were lower. Norwegian Cruise Line and Carnival Corp were lower by more than 5% each. American Airlines and United Airlines fell 6.95% and 7.6%, respectively.
“With the increasing virus cases, people are playing the stay-at-home stocks,” said Brent Schutte, chief investment strategist for Northwestern Mutual Wealth Management. “One thing I will say is the probability of returning to a nationwide lockdown is incredibly slim. So I wouldn’t be surprised to see more of a rolling back-and-forth market rather than one that goes straight up like we’ve seen the past few months.”
More than 2.93 million coronavirus cases have been confirmed in the U.S. along with at least 130,306 deaths, according to Johns Hopkins University. Over the weekend, more than 20 states reported a hospitalization growth rate of at least 5%
Atlanta Federal Reserve President Raphael Bostic also told The Financial Times the U.S. economic recovery will be “bumpier” as coronavirus cases continue to rise.
Positive news on the coronavirus front gave the market a boost earlier on Tuesday. The U.S. government awarded drugmaker Novavax a $1.6 billion contract to develop a coronavirus vaccine, the biggest amount yet granted under the White House’s “Operation Warp Speed.” Novavax shares were up 37%.
Wall Street was coming off strong day that saw the Dow jump more than 450 points.
“While we expect continued volatility, we think there are grounds for optimism that economies and markets can weather the recent acceleration in infections,” Mark Haefele, chief investment officer at UBS, said in a note. “There are signs that healthcare systems are coping better with COVID-19, reducing the need for restrictions on freedom of movement. Economic data continues to point to resilience.”