NEW YORK CITY, RAW – The Nasdaq has ended sharply lower as investors dumped megacap growth stocks to seek shelter in more defensive parts of the market amid concerns on rising interest rates and uncertainty over an upcoming jobs report.

Highly valued technology-related companies including Microsoft Corp, Alphabet Inc, Apple Inc, Inc and Facebook Inc sold off across the board.

The Philadelphia Semiconductor Index also dropped.

Comments by Treasury Secretary Janet Yellen on the potential need for interest rate hikes further exacerbated the tech sell-off as investors worry higher rates would weigh on valuations of growth companies.

“It may be that interest rates will have to rise somewhat to make sure that our economy doesn’t overheat, even though the additional spending is relatively small relative to the size of the economy,” she said in taped comments at a virtual event by The Atlantic.

Seven out of the 11 major S&P 500 sectors fell, with technology, communication services and consumer discretionary falling the most.

“Wall Street won’t find out if the Fed is making a policy mistake until several months down the road and that is making some traders nervous,” Edward Moya, senior market analyst at Oanda wrote in a note.

“After Friday’s non-farm payroll report, investors will see a clear path for the US economy to recover the remaining lost jobs due to COVID and noticeably hear more companies talk about raising prices.”

The Dow Jones Industrial Average rose 22.11 points, or 0.06 per cent, to 34,135.34, the S&P 500 lost 27.61 points, or 0.66 per cent, to 4,165.05 and the Nasdaq Composite dropped 261.62 points, or 1.88 per cent, to 13,633.50.

“When we have pauses or pullbacks, people tend to move out of growth stocks into more defensive names,” said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.

Fiscal stimulus, rapid vaccinations and the Federal Reserve’s accommodative stance have spurred a strong rebound in the US economy and pushed Wall Street to record highs this year.

The so-called “pandemic winners,” however, have recently started to fall out of favour.

Among other stocks, CVS Health Corp gained after reporting a first-quarter profit above analysts’ estimates and raising its 2021 forecast.

Gartner, rose after delivering better-than-expected first-quarter earnings.

Results in this earnings season so far have been largely upbeat.

Average profits at S&P 500 companies are expected to have risen 47.7 per cent in the quarter compared with forecasts of a 24 per cent growth at the start of April, according to IBES data from Refinitiv.

Investors are also awaiting data through the week, including the Labor Department’s monthly non-farm payrolls due on Friday.

The report is expected to show a rise in job additions in April.