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

HONG KONG â€”  Tumbling tech stocks dragged Wall Street to its worst day in three weeks on Tuesday.

The S&P 500 dropped 1% for its second straight loss after closing last week at an all-time high. The Dow Jones industrial average fell or 1%, and the Nasdaq composite index led the market lower with a 1.7% slide.

Apple’s drop of 2.8% 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 major tech stocks that’s bent recently under the weight of loftier expectations after running much higher in price. Since the start of last year, a select group known as the “Magnificent Seven� has been responsible for the vast majority of the S&P 500’s run to all-time highs.

Drops for several of them were among the heaviest weights on the S&P 500 on Tuesday. Microsoft fell 3%, Amazon slid 1.9% and Tesla dropped 3.9%.

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, particularly with criticism rising that shares have gotten too expensive.

High-growth stocks have generally been rallying for several reasons, including a frenzy around artificial intelligence technology, but if they “fail to deliver on aggressive expectations, growth investors probably will wind up disappointed,� according to the asset allocation team at GMO, the investment firm co-founded by Jeremy Grantham.

MicroStrategy fell 21.2% after it said it would raise $600 million in debt, which it will use to buy more bitcoin and for “general corporate purposes.�

Bitcoin briefly rose above $69,000 on Tuesday, surpassing its record set in 2021, before pulling back below $63,000. It’s been surging in part because of new exchange-traded funds that offer easier access for investors to the cryptocurrency. It roughly tripled over the last 12 months, but it’s notorious for huge swings in both directions that can happen painfully and suddenly.

Target helped limit the market’s losses after climbing 12%. 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 also rose 17.9% to trim its loss for the week so far to 9.3%. 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 probably 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.

All told, the S&P 500 fell 52.30 points to 5,078.65. The Dow dropped 404.64 points to 38,585.19, and the Nasdaq sank 267.92 points to 15,939.59.

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

Perhaps more important 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 2% target.

After Tuesday’s reports, bets built among traders that the Federal Reserve will begin cutting interest rates in June. The Fed’s main rate was raised to 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 H. Powell will give testimony before Congress later this week, which could further sway expectations for when rate cuts could begin.

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

In stock markets abroad, Hong Kong’s Hang Seng index sank 2.6%. China’s premier said the country’s target for economic growth this year is around 5%, in line with expectations. But the government’s intention to keep its deficit at 3% the size of China’s overall economy may have disappointed investors hoping for more aggressive action.

Stocks in Shanghai inched up 0.3%.

AP writers Elaine Kurtenbach and Matt Ott contributed to this report.