Tech shares hammered as interest rate fears hit US stocks

The tech-rich Nasdaq Composite Index finished 1.8 percent lower at 7,879.51.

The Dow Jones Industrial Average and S&P 500 both dropped 0.8 percent, the former ending at 26,627.48 -- retreating from two days of records -- and the latter at 2,901.61.

The declines came as the yield on the 10-year US Treasury bond rose to 3.20 percent after sharply increasing on Wednesday.

Karl Haeling of LBBW said the market has been expecting higher yields in light of strong growth and Federal Reserve interest rate hikes. But the rapid rise jolted investors.

"What upset people was the speed of the increase in yields," he said.

One worry is that higher rates will dissuade companies from taking loans and crimp economic growth.

"We've been in this loose money market for so long," said JJ Kinahan, chief market strategist at TD Ameritrade.

"Peoples' fear is where is spending going to come from if people are less inclined to take loans. What's the new stimulus going to be?"

Analysts also said investors were perturbed at rising tensions between the United States and China amid a serious trade dispute as Vice President Mike Pence in a speech in Washington accused Beijing of meddling in US politics.

Large technology shares were under pressure, with Apple losing 1.8 percent, Amazon falling 2.2 percent and Google-parent Alphabet 2.9 percent.

Constellation Brands slumped 5.4 percent after reporting that second-profits more than doubled to $1.1 billion.