Wall Street slumps to worst day in weeks; bitcoin touches record before tumbling

A bicyclist passes the New York Stock Exchange on Tuesday, March 5, 2024, in New York. Wall Street pointed modestly lower as more retailers post results from the holiday season and ahead of appearance by Federal Reserve Chair Jerome Powell before Congress later this week. (AP Photo/Peter Morgan)

NEW YORK — Big Tech stocks pulled Wall Street down to its worst day in three weeks. The S&P 500 fell one per cent Tuesday, its second straight drop after closing last week at an all-time high.

The Dow Jones Industrial Average also lost one per cent, and the Nasdaq composite gave back 1.7 per cent. Apple was one of the heaviest weights on the market. It's been struggling on worries about sluggish iPhone sales in China. Microsoft, Tesla and other influential stocks also sank. Treasury yields fell after U.S. economic data was weaker than expected. Bitcoin touched a record high before tumbling.

THIS IS A BREAKING NEWS UPDATE. AP's earlier story follows below.

NEW YORK (AP) -- Sinking Big Tech stocks are pulling Wall Street toward its worst day in three weeks on Tuesday.

The S&P 500 was 1.3 per cent lower in late trading and on track for a second straight loss after closing last week at an all-time high. The Dow Jones Industrial Average was down 473 points, or 1.2 per cent, with an hour remaining in trading, and the Nasdaq composite was two per cent lower.

Apple's drop of 2.9 per cent was one of the heaviest weights on the market. It's been struggling on worries about sluggish iPhone sales in China, where tough competition and a faltering overall economy are challenging it.

Apple is one of several Big Tech stocks that's struggled recently under the weight of much higher expectations after running much higher in price over the last year. A select group known as the "Magnificent Seven" has been responsible for the vast majority of the S&P 500'ls leap to all-time highs. Drops on Tuesday of 3.3 per cent for Microsoft, 2.3 per cent for Amazon and 4.5 per cent for Tesla were also among the heaviest weights on the S&P 500.

Piling into tech stocks has become one of the most popular moves on Wall Street among both mutual funds and hedge funds, according to strategists at Barclays Capital. That can raise the risk of sharp drops later when the momentum breaks. And the pressure is high on the Magnificent Seven to at least meet expectations to justify their big stock gains.

MicroStrategy fell 17.4 per cent after it said it will raise US$600 million in debt, which it will use to buy more bitcoin and for "general corporate purposes."

Bitcoin briefly rose above $69,000 Tuesday, surpassing its record set in 2021, before pulling back toward $60,000. It had been surging in part because of new exchange-traded funds that offer easier access for investors to the cryptocurrency. It had roughly tripled over the last 12 months, but it's notorious for huge swings in both directions that can happen painfully and suddenly.

Target was helping to limit the market's losses after climbing 11.8 per cent. It reported a bigger jump in profit for the end of 2023 than analysts expected as it held the line on some expenses.

New York Community Bancorp was also rising, up 17.6 per cent, a day after it plunged 23 per cent. The bank is under pressure because of losses tied to investments it has related to commercial real estate. It's also under heavier regulatory scrutiny because of its purchase of much of Signature Bank, one of the banks that fell in last year's mini-crisis for the industry.

Several analysts still say NYCB's problems are likely unique to it, more than a signal of coming trouble for banks broadly, particularly after U.S. government efforts last year to bolster the industry. But if interest rates remain high, more pressure could build on the entire industry.

Hopes for coming cuts to interest rates got a boost after a report in the morning showed growth for U.S. construction, health care and other services industries slowed by more last month than economists expected.

Perhaps more importantly for the market, the report also said prices paid by services businesses rose at a slower pace in February than in January. A separate report, meanwhile, said U.S. factory orders weakened by more in January than expected.

Wall Street's hope has been that the economy will continue plugging along, but not at such a strong pace that it keeps upward pressure on inflation. That's because traders want the Federal Reserve to cut interest rates this year, something it's hinted it will do only if inflation cools decisively toward its two per cent target.

Following Tuesday's reports, bets built among traders that the Federal Reserve will begin cutting interest rates in June. The Fed's main rate is at its highest level since 2001 in hopes of grinding down inflation. Any cuts would relieve pressure on the economy and financial system.

Fed Chair Jerome Powell will give testimony before Congress later this week, which could further sway expectations for when cuts to rates could begin.

In the bond market, the yield on the 10-year Treasury fell to 4.13 per cent from 4.22 per cent late Monday.

In stock markets abroad, Hong Kong's Hang Seng index sank 2.6 per cent after China's premier said the country's target for economic growth this year is around five per cent, in line with expectations. .

Li Qiang, addressing the opening meeting of China's National People's Congress, also said Beijing would issue 1 trillion yuan (US$139 billion) in long-term bonds to help bridge funding gaps, provide support to financially strapped local governments and invest in both advanced technology and in social support and education.

But the government's intention to keep its deficit at three per cent the size of China's overall economy may have disappointed investors hoping for more aggressive action.

Stocks in Shanghai inched up by 0.3 per cent, while indexes were modestly lower across much of the rest of the world.

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AP Business Writers Elaine Kurtenbach and Matt Ott contributed.