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Wall Street falls as tech stocks slump

Herbert Lash
·3-min read

US stock indexes have closed lower, capping Wall Street's worst week since the March sell-off, as losses in richly priced tech heavyweights, a record rise in coronavirus cases and jitters over the presidential election snuffed investor sentiment.

The pandemic pushed US hospitals to the brink of capacity as coronavirus cases surpassed 9 million while the prospect of wider COVID-19 restrictions in Europe raised concerns about the economic recovery.

The CBOE volatility index held at a 20-week high, a sign of investors jitters ahead of the final weekend before election day on Tuesday.

"We're two market days away from election day and people want to make sure that they're not completely caught off guard," said Pete Santoro, a Boston-based equity portfolio manager at Columbia Threadneedle.

The S&P 500 has fallen about 9.7 per cent since hitting an all-time high in early September in a rally driven by the tech mega caps whose quarterly results this week failed to meet highly optimistic expectations.

Apple Inc tumbled after it posted the steepest drop in quarterly iPhone sales in two years due to the late launch of new 5G phones.

Amazon.com Inc slid after it forecast a jump in costs related to COVID-19 while Facebook Inc fell sharply as it warned of a tougher 2021.

"All these names are eventually going to be repriced, they're all ridiculously valued. It's just that I don't know when and I don't know from what stratospheric valuation they inevitably reprice," said David Bahnsen, chief investment officer at The Bahnsen Group in Newport Beach, California.

Communication services got a boost from a jump in shares of Alphabet Inc after the Google parent beat estimates for quarterly sales as businesses resumed advertising.

Google may have benefited as it has been trading at about 36 times earnings, far less than the 119 times earnings valuation of Amazon, Bahnsens said.

"There is a big sell-off in those big tech names because they didn't live up to the hype and people are really worried about next week's election," said Kim Forrest, chief investment officer at Bokeh Capital Partners in Pittsburgh.

Republican President Donald Trump has consistently trailed Democratic challenger Joe Biden in US polls for months but polls have shown a closer race in the most competitive states that could decide the election.

The Dow Jones Industrial Average fell 153.83 points, or 0.58 per cent, to 26,505.28, the S&P 500 lost 39.94 points, or 1.21 per cent, to 3,270.17 and the Nasdaq Composite dropped 274.00 points, or 2.45 per cent, to 10,911.59.

The third-quarter earnings season is almost past its halfway mark, with about 86.2 per cent of S&P 500 companies topping earnings estimates, according to Refinitiv data.

Overall, profit is expected to fall 10.3 per cent from a year earlier.

Twitter Inc slumped after the micro-blogging site added fewer users than expected and warned the US election could affect ad revenue.