Tech sells off as Nasdaq plunges more than 2%



* Tech, consumer leads S&P 500 to red

* Indexes down: Nasdaq 2.47%, S&P 1.05%, Dow 0.21%

* CVS Health gains after raising 2021 profit view

By Shreyashi Sanyal and Krystal Hu

May 4 (Reuters) - The Nasdaq tumbled more than 2% on Tuesday as steep declines in megacap growth stocks pushed Wall Street below record trading levels, with investors seeking shelter in more defensive parts of the market.

Highly valued technology-related companies including Microsoft Corp MSFT.O , Alphabet Inc GOOGL.O , Apple Inc AAPL.O , Amazon.com Inc AMZN.O and Facebook Inc FB.O fell between 2.2% and 4.2%. The Philadelphia Semiconductor Index SOX dropped over 2.3%.

Comments by Treasury Secretary Janet Yellen on the potential need for rising interest rate further exacerbated the tech selloff, as investors worry higher rates would weigh on valuations of growth companies.

"It may be that interest rates will have to rise somewhat to make sure that our economy doesn't overheat, even though the additional spending is relatively small relative to the size of the economy," she said in taped comments at a virtual event by The Atlantic on Tuesday.

Seven out of the 11 major S&P 500 sectors were down, with technology .SPLRCT , communication services .SPLRCL and consumer discretionary .SPLRCD falling more than 1.7% each.

The defensive financials .SPSY , materials .SPLRCM and energy .SPNY sectors managed to extend their gains from Monday, rising sightly in early afternoon trading.

"When you're at all-time highs and the market pulls back, the ones that tend to lead to the downside are often the high-beta stocks such as technology," said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.

"When we have pauses or pullbacks people tend to move out of growth stocks into more defensive names."

Fiscal stimulus, rapid vaccinations and the Federal Reserve's accommodative stance have spurred a strong rebound in the U.S. economy and pushed Wall Street to record highs this year. The so-called "pandemic winners," however, have recently started to fall out of favor.

By 2:05 p.m. ET (1805 GMT), the Dow Jones Industrial Average .DJI fell 72.32 points, or 0.21%, to 34,040.91, the S&P 500 .SPX lost 44.02 points, or 1.05%, to 4,148.64 and the Nasdaq Composite .IXIC dropped 343.71 points, or 2.47%, to 13,551.41.

The largest percentage gainer on the S&P 500 was Gartner IT.N , which rose 12.7% after delivering better-than-expected first-quarter earnings.

Among other stocks, CVS Health Corp CVS.N gained 4.1% after reporting a first-quarter profit above analysts' estimates and raising its 2021 forecast.

First-quarter earnings have been largely upbeat. Average profits at S&P 500 companies are expected to have risen 47.7% in the quarter, compared with forecasts of a 24% growth at the start of April, according to IBES data from Refinitiv.

Investors are also awaiting data through the week, including the Labor Department's monthly non-farm payrolls due on Friday. The report is expected to show a rise in job additions in April.

Declining issues outnumbered advancers for a 2.37-to-1 ratio on the NYSE and for a 4.03-to-1 ratio on the Nasdaq.

The S&P index recorded 69 new 52-week highs and no new low, while the Nasdaq recorded 66 new highs and 87 new lows.
Reporting by Shreyashi Sanyal and Sruthi Shankar in Bengaluru, Krystal Hu in New York; Editing by Saumyadeb Chakrabarty and Marguerita Choy

Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.

All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.

Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.

We are using cookies to give you the best experience on our website. Read more or change your cookie settings.

Risk Warning: Your capital is at risk. Leveraged products may not be suitable for everyone. Please consider our Risk Disclosure.