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 The big drop in momentum stocks overshadowed the day's relatively
strong March jobs data, which helped the Dow and S&P 500 hit
intraday record highs early in the session.
Nasdaq's 2.6 percent loss follows a nearly 1 percent slide on
Thursday and puts the index more than 5 percent below its closing
high for the year, which was set on March 5.
The day's action in momentum names — typically high-growth companies
mostly in the tech and biotech sectors that led 2013's rally — extends their recent selloff, which investors mostly have been at a
loss to explain.
"For the past couple of weeks, the high-beta, high-risk, high-reward
type plays have been underperforming the larger-cap S&P 500 and even
the Dow," said Joe Bell, senior equities analyst with Schaeffer's
Investment Research in Cincinnati.
He said it doesn't necessarily mean a longer-term pullback is in
store for the market, but he pointed out that "in the short term,
it's a concern. I think you want to see some of those names come
back into leadership here."
The S&P 500's biggest percentage decliners included some Nasdaq
names: E*Trade Financial <ETFC.O> slid 7.8 percent to $20.43;
Netflix <NFLX.O> dropped 4.9 percent to $337.31, and TripAdvisor <TRIP.O>
fell 6.1 percent to $85.69.
Price-to-earnings ratios for the momentum names typically are much
higher than average. For instance, TripAdvisor's P/E is 42.5 and
Netflix's is 87.8, while the P/E for the S&P 500 is 15.4, according
to Thomson Reuters data.
The Dow Jones industrial average <.DJI> fell 159.84 points or 0.96
percent, to close at 16,412.71. The S&P 500 <.SPX> lost 23.68 points
or 1.25 percent, to finish at 1,865.09.
The Nasdaq Composite <.IXIC> ended at 4,127.726, down 110.014 points
or 2.6 percent, its worst daily percentage loss since February.
For the week, the Dow rose 0.6 percent and the S&P 500 gained 0.4
percent, while the Nasdaq fell 0.7 percent.
Momentum names appeared to stabilize earlier this week before
resuming their decline on Thursday.
Two weeks ago, Gilead Sciences' stock <GILD.O> dropped after U.S.
lawmakers asked it to explain the $84,000 price tag of its new
hepatitis C drug Sovaldi, and that decline set off a wave of losses
in other biotech and momentum names.
"Technically, the S&P and Dow look much stronger than the tech
indices," Bell said.
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The Nasdaq biotech index <.NBI> dropped 4.1 percent to 2,356.60. The
index is down about 18 percent from its lifetime high reached in
February.
For the day, Biogen Idec Inc <BIIB.O> dropped 4.5 percent to end at
$288.27, while Gilead Sciences <GILD.O> slid 2.4 percent to close at
$72.20.
Earlier in the day, the S&P 500 touched a lifetime high of 1,897.28,
the third time this week that the index set an intraday record,
while the Dow hit an intraday record high of 16,631.63.
The government's nonfarm payrolls report showed a solid pace of
hiring for a second month, suggesting the economy appears to be
recovering from a winter slowdown.
Employers added 192,000 jobs in March, just shy of the 200,000
forecast, after hiring 197,000 in February. The unemployment rate was unchanged
at 6.7 percent, according to the report.
Shares of Halozyme Therapeutics Inc <HALO.O> plunged 27.3 percent to
close at $8.43 after the company said it was temporarily halting
enrollment of patients and dosing of its cancer drug in a mid-stage
trial on patients with pancreatic cancer, after the recommendation
of an independent safety committee.
Decliners beat advancers on the NYSE by 1,987 to 1,043 and on the
Nasdaq by 2,217 to 446.
About 7.6 billion shares changed hands on U.S. exchanges, well above
the 6.3 billion average so far this month, according to data from
BATS Global Markets.
(Editing by Bernadette Baum, Nick Zieminski and Jan Paschal)
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