By Yasin Ebrahim
Investing.com – The Nasdaq suffered its worst day in nearly one month on Thursday as a sea of red swept through mega-cap tech stocks and a jump in jobless claims renewed concerns about the pace of the recovery as the relentless spread of the virus continues.
The Nasdaq Composite fell 2.29% and S&P 500 lost 1.23%, while the the Dow Jones Industrial Average slumped 1.31%.
Mega-cap tech, which has done most of heavy-lifting to support the broader market rally since March, came under pressure as concerns about frothy valuations resurfaced.
Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOGL), Amazon.com (NASDAQ:AMZN), Facebook Inc (NASDAQ:FB) and Microsoft (NASDAQ:MSFT), the so-called Fab 5, making up about 40% of the Nasdaq, fell more than 3%.
Apple led the sell off after Goldman urged investors to avoid the stock, citing expectations for slowing growth in 2021. "We continue to forecast calendar 2021 earnings per share for Apple that is 16% below consensus as product unit sales and average selling prices falter and services growth slows," Goldman Sachs (NYSE:GS) said.
Microsoft ended 4% after its guidance fell short of consensus estimates and overshadowed better-than-expected quarterly results.
Tesla (NASDAQ:TSLA), meanwhile, reversed gains to end lower despite rolling blowout earnings for the second-quarter and retaining initial guidance to deliver over 500,000 vehicles for the year.
Twitter sidestepped the selloff to end up 4% as the social media company reported a 34% jump in daily active users. Its shares closed 4% higher.
Investor sentiment was further soured by signs of cracks in the labor market.
The U.S. Labor Department reported that 1.4 million people filed for unemployment insurance for the week ended July 18, up 109,000 from the prior week and above economists' estimates of 1.3 million.
'The surge of Covid cases in the Sun Belt and the stalling out of reopening activities in other states has seemingly caused another round of layoffs that has stymied the nascent labor market recovery,' Jefferies (NYSE:JEF) said in a note.
The number of confirmed U.S. coronavirus cases neared 4 million, according to Johns Hopkins data, the most in the world.
Despite growing doubt over the prospect of a robust recovery, stocks tied to the performance proved more somewhat resilient. Financials, energy, and industrials ended the day with losses of less than 1%.