Stocks reversed course on Monday, closing lower as a rally in major tech names — which briefly pushed the S&P 500 into positive territory for the year — fizzled out.
The S&P 500 closed 0.9% lower at 3,155.22. Earlier in the day, the broader market index rallied more than 1% and was briefly up about 0.1% for 2020. Monday marked the first time since early June that the S&P 500 traded positive year to date.
The tech-heavy Nasdaq Composite pulled back 2.1% to 10,390.84 after being up as much as 1.95%. The Nasdaq-100 — which is made up of the 100-largest nonfinancial companies in the composite — briefly broke above 11,000 for the first time before falling 2.2%.
The Dow Jones Industrial Average eked out a gain of 10.50 points, or less than 0.1%, to close at 26,085.80. The 30-stock average had rallied as much as 563.79 points, or 2.2%.
Facebook, Amazon, Netflix, and Alphabet all closed at least 1.7% lower. Apple fell 0.5% and Microsoft lost 3.1%. Earlier in the day, these stocks were broadly higher. These names are some of the market stalwarts this year, as investors keep betting they will perform well during the pandemic.
"No sentient human could look at some of the super-cap tech stocks and say the latest move wasn't anything other than a momentum-driven melt-up rally (this isn't to say the gains aren't real and anyone recommending a more cautious view has obviously been wrong, but investors need to realize 'growth' right now is like a game of musical chairs with 100 players and 3 chairs)," said Adam Crisafulli of Vital Knowledge.
Tesla rallied as much as 16.2%, but closed 3.1% lower.
"Tesla is the poster boy of a parabolic move here. Tesla started to roll over at 11:40 a.m.," said Peter Boockvar, chief investment officer at Bleakley Advisory Group. "That accelerated and at about 2 p.m. The California headlines just exaggerated the move ... we know it's a one-way street. It got really just stretched and overbought and over-crazed in these tech stocks."
The Dow and the S&P 500 are coming off two consecutive weeks of gains, while the resilience in tech shares pushed the Nasdaq to a new record after three straight positive weeks.
"The overall rally is still very narrow...and several of the high flying mega-cap stocks are becoming overbought (and more over-valued)," Matthew Maley, chief market strategist at Miller Tabak, said in a note on Sunday. "Therefore, we HAVE to wait to see if the key resistance level on the S&P is indeed broken to the upside before we can confirm that another rally leg in the broad stock market has begun."
Pfizer and German biotech BioNTech SE were granted fast track designation by the FDA for two of the companies' four vaccine candidates against the coronavirus. BioNTech jumped 11%. Pfizer gained 4.1%.
Pfizer and BioNTech said they expect to start the next phase of the vaccine trial later this month with 30,000 subjects. The companies expect to have 100 million doses of a vaccine by the end of 2020 and more than 1.2 billion doses by the end of 2021, according to a release.
The news on BioNTech and Pfizer's vaccine candidates came after Florida reported 15,299 new coronavirus cases on Sunday, the highest single day total for any U.S. state since the pandemic began. Meanwhile, the U.S. has reported more than 60,000 new cases daily for three days in a row now, bringing the national total to more than 3 million cases, according to data from Johns Hopkins University.
The news also gave the market a boost early in the session.
"Every time there has been a positive announcement regarding a vaccine, it's had a halo effect on the market," said Quincy Krosby, chief market strategist at Prudential Financial. "This is a market that has been desperate to see the other side of this, and the only way it can do that, is watching those announcement from the companies moving towards a vaccine."
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—CNBC's Patti Domm and Michael Bloom contributed to this report.