Nasdaq ends sharply lower as investors dump growth stocks

Dec 16 - The Nasdaq ended sharply lower on Thursday as the Federal Reserve's announcement of a faster end to its pandemic-era stimulus pushed investors away from Big Tech and toward more economically sensitive sectors.

Nvidia Apple Microsoft, Amazon and Tesla all tumbled, hitting the Nasdaq and the S&P 500.

Most of the heavyweight growth stocks have outperformed the broader market in 2021, with Nvidia up more than 100% year to date.

Unofficially, the Dow Jones Industrial Average fell 0.09% to end at 35,893.36 points, while the S&P 500 lost 0.88% to 4,668.45.

The Nasdaq Composite dropped 2.47% to 15,180.42.

The US central bank said on Wednesday it would end its bond purchases in March and signaled three quarter-percentage-point interest rate hikes by the end of 2022.

That pleased investors who have increasingly worried about an inflation spike related to the coronavirus pandemic. But on Thursday it contributed to the sell-off in growth stocks.

The S&P 500 value index climbed, while the growth index fell sharply, reflecting investors' views that high-growth stocks tend to underperform when interest rates rise. The value index includes stocks seen as more likely to do well during an economic recovery.

"You're seeing money come out of growth, as it should. If we are going into an environment where interest rates are going up, growth stocks are going to be less attractive" said Dennis Dick, a trader at Bright Trading LLC.

"There's a lot of uncertainty as we go into 2022... We're going to have a more hawkish Fed that is going to pull away the punch bowl," he said.

Among the 11 major S&P 500 sector indexes, technology slumped, while financials rallied.

"The Fed gave the market what it wanted, and today I think investors are turning again to pandemic uncertainty, and they're also cautious going into the end of the year," said Lindsey Bell, chief investment strategist at Ally Invest, in Charlotte, North Carolina.

Recent readings on surging producer and consumer prices, as well as the fast-spreading Omicron variant of the coronavirus, have fueled anxiety. The S&P 500, nonetheless, remains up about 25% in 2021 and it is trading near record highs.

The CBOE Volatility index, often considered Wall Street's fear gauge, slipped to a three-week low.

Data showed the number of Americans filing new claims for unemployment benefits increased moderately last week, remaining at levels consistent with tightening labor market conditions.

Separately, a survey showed production at US factories increased to the highest level in nearly three years in November.

Lennar Corp fell after the homebuilder missed analysts' estimates for quarterly profit as pandemic-led supply chain issues pushed lumber costs higher and delayed house deliveries.

Reuters