Dow turns positive in late-day comeback led by Apple, Dow was down 600 points

Stocks clawed back most of their earlier losses on Friday as names that would benefit from the economy reopening outperformed and some tech shares recovered. 

The Dow Jones Industrial Average briefly turned positive after dropping as much as 628.05 points, or 2.2%. The Nasdaq Composite dropped 1.3% and the S&P 500 slid 0.5%. At their session lows, the Nasdaq and S&P 500 were down 3.1% and 5.1%, respectively. 

Boeing shares rose more than 1% while bank stocks gained broadly. JPMorgan Chase and Citigroup were both up more than 2%. Bank of America climbed 3.5%. Wells Fargo advanced 1.1%. More beaten-down parts of the market rebounded Thursday and added to those gains Friday. Cruise operator Carnival advanced 2.6% on Friday.

“We might finally see some rotations that could lead to new market leadership,” said Peter Cardillo, chief market economist at Spartan Capital Securities. “That’s something we’ve been lacking for a long time.”

The major averages were down sharply earlier in the day as tech stocks extended their steep declines. On Thursday, the S&P 500 tech sector suffered its biggest one-day drop since March. Tech’s sell-off came after the space drove the lion’s share of the broader market’s comeback off the coronavirus lows. Since March 23, the S&P 500 tech sector is up about 70%. For the year, tech has rallied more than 30%.

“We’ve had excessive valuations in the markets lately — particularly in the tech sector — and that needed to be corrected to some degree,” said Scott Knapp, chief market strategist at CUNA Mutual Group. “One needs to look no further than the recent irrational run-up in Tesla and Apple share prices after both companies announced a stock split to see overexuberance, especially among retail investors.”

Both Tesla and Apple rallied recently after announcing stock splits.

On Friday, Apple was down as much as 8.3%. With roughly one hour left in the session, however, the stock traded less than 1% lower. 

Japan’s SoftBank reportedly bought billions of dollars in individual stock options in big tech companies over the past month, driving up volumes and contributing to a trading frenzy. The heightened options trading activity was credited by many analysts for adding froth to the stock market.

We view the latest sell-off as a bout of profit-taking after a strong run,” said Mark Haefele, CIO at UBS Global Wealth Management. “Stocks are still well-supported by a combination of Fed liquidity, attractive equity risk premiums, and an ongoing recovery as economies reopen from the lockdowns.”

U.S. unemployment falls

The U.S. unemployment rate fell to 8.4% last month from 10.2% in July, the Labor Department said. Economists polled by Dow Jones expected the rate to decline to 9.8%. As for overall jobs creation, employment in the U.S. grew by 1.37 million in August, topping an estimate of 1.32 million. 

“The jobs data today were solid,” said Jamie Cox, managing partner at Harris Financial Group. “However, now the real work begins.”

“The next 2-3% of employment gains are going to be very tough because there is no total reopening in sight. PPP funds are running dry and the impasse in Congress to reauthorize another round for struggling small businesses most affected by the pandemic are recipes for a wave of small business closures,” Cox said.

— CNBC’s Yun Li contributed reporting.

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