TSLA Tesla Inc

By Michael Wursthorn 

The late February tech-stock rout deepened Tuesday, with the Nasdaq Composite Index falling 3% and Tesla Inc. tumbling as much as 12% as rising interest rates prompt a broad re-evaluation of investor growth expectations.

The Nasdaq pullback puts the tech-focused index on track for its steepest decline since Sept. 8. Tesla, whose 743% surge last year highlighted the tech-led market rebound from the coronavirus selloff, is now down for 2021 and has lost a quarter of its value since the electric-car firm said Feb. 8 that it had spent $1.5 billion on bitcoin in a bid to boost returns on cash.

Other investor favorites were also hit hard in early trading. Moderna Inc., the biotech maker of a major Covid vaccine, dropped 13%. Apple dropped 3.4% and Amazon.com Inc. fell 2%.

The tech firms have emerged as a favorite of the small investors who have piled into stock and options trading over the past year, with Nasdaq rising 44% in 2020. But the scale of the rally has prompted concerns that many of the stocks are overvalued, making them vulnerable to sudden slumps.

The rise in U.S. interest rates over the past week to a recent 1.37% on the 10-year Treasury note signifies expectations of faster economic growth, which investors said reduces the relative attractiveness of the tech firms compared with more economically sensitive and less highly valued investments such as banks and manufacturing firms.

"We're seeing a nasty, violent rotation," said Mike Bailey, director of research at FBB Capital Partners, an investment manager in Bethesda, Md. "A lot of the stratosphere stocks are getting dragged down."

Write to Michael Wursthorn at Michael.Wursthorn@wsj.com

(END) Dow Jones Newswires

February 23, 2021 10:40 ET (15:40 GMT)

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