Nasdaq plunges more than 2% as investors dump growth stocks

The Nasdaq fell more than 2% on Tuesday as steep declines in megacap growth stocks pushed Wall Street below record trading levels.

Investors also sought shelter in more defensive parts of the market.

All the 11 major S&P 500 sectors were down, with technology, communication services and consumer discretionary falling more than 2% each.

The defensive consumer staples, utilities and real estate sectors fell the least.

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.

U.S. and European stock markets also saw a sudden 0.5% drop in hefty volumes around 7:30 a.m. ET on Tuesday, leaving traders perplexed.

At 11:49 a.m. ET, the Dow Jones Industrial Average was down 235.73 points, or 0.69%, at 33,877.50, the S&P 500 was down 56.17 points, or 1.34%, at 4,136.49 and the Nasdaq Composite was down 379.74 points, or 2.73%, at 13,515.38.

Among other stocks, CVS Health Corp gained 3.7% 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.