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Stocks recover some losses by end of 2nd rocky day

by ALEX VEIGA AND DAMIAN J. TROISE THE ASSOCIATED PRESS | September 5, 2020 at 1:54 a.m.
FILE - Marble sculptures occupy the pediment above the New York Stock Exchange signage, Tuesday Aug. 25, 2020, in New York. Stocks are falling again on Wall Street Friday, Sept. 4, a day after a big slump in technology companies pulled the market to its biggest drop since June. (AP Photo/Bebeto Matthews, File)

The stock market closed out its worst week in more than two months Friday as a second-straight day of turbulent trading ended with more losses.

The S&P 500 fell 0.8%, although the index did claw most of the way back from a 3.1% skid earlier in the day. A slide in technology stocks again did much of the damage.

The S&P 500 fell 28.10 points to 3,426.96. The Dow Jones Industrial Average lost 159.42 points, or 0.56%, to 28,133.31. The index had swung sharply during the day, between a loss of as much as 628 points and a gain of as much as 247.

The technology-heavy Nasdaq dropped 144.97 points, or 1.27%, to 11,313.13. The slide added to the index's 5% skid from the day before.

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The two-day sell-off came after the S&P 500 set new highs earlier in the week and had its best day in nearly two months. There wasn't a particular catalyst for continued selling in the high-flying tech sector, but analysts noted that those stocks had posted gigantic gains so far this year that many thought were overdone.

"We had a fast and furious rally at the end of August and we've given it back," said Barry Bannister, head of institutional equity strategy at Stifel. "Investors are like a herd of gazelle on the Serengeti; it doesn't take much to spook them. They're alarmed and on the move."

The selling followed a Labor Department report showing that U.S. hiring slowed to 1.4 million last month, the fewest jobs added since the economy started bouncing back from the initial shock of the pandemic, even as the nation's unemployment rate improved to 8.4% from 10.2%. The U.S. economy has recovered about half of the 22 million jobs lost to the pandemic.

The Chicago Board Options Exchange volatility index, a gauge of how much volatility investors expect in the market, has been rising. Even so, traders were not shifting funds into traditional safe-haven assets such as U.S. government bonds and precious metals, a sign that the sell-off was not necessarily a reaction to jitters about the economy.

"A lot of people were piling into the [tech] trade and there are a lot of gains to be made," said Stephanie Roth, portfolio macro analyst at J.P. Morgan Private Bank. "This is more an instance of profit-taking, rather than true panic."

She noted it's not unusual for traders to pocket recent gains ahead of a holiday weekend. U.S. markets will be closed Monday for Labor Day.

The 10-year Treasury yield rose to 0.72%, up from 0.62% late Thursday, a big move. The higher yields helped send financial stocks higher, since banks can lend money at higher rates once yields rise in the bond market. Capital One Financial rose 4.7%.

Apple was down for much of the day before ending with only a 0.1% gain, Amazon dropped 2.2% and Zoom fell 3%. And yet, Apple is still up 64.8% this year, while Amazon is up 78.3%. And Zoom is up more than 443% for the year. Even with this week's pullback, technology is up 28.8% this year, well ahead of the S&P 500's 10 other sectors.

"The tech gains were so far, so quick that it was almost concerning, so the reversal of that is natural volatility," Roth said. "We should expect to see some larger corrections."

Despite this week's stumble, the S&P 500 is up 6.1% for the year following a five-month comeback from its lows in the spring. The Nasdaq, meanwhile, is up 26.1% for the year.


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