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The Nasdaq ended sharply lower on Tuesday as investors dumped megacap growth stocks to seek shelter in more defensive parts of the market, amid concerns about rising interest rates and uncertainty over an upcoming jobs report. The TSX ended with just a slight loss.

Highly valued technology-related companies including Microsoft Corp, Alphabet Inc, Apple Inc , Amazon.com Inc and Facebook Inc sold off across the board, with Apple falling the most by 3.54%. The Philadelphia Semiconductor Index also dropped by 1.6%.

Volume on U.S. exchanges was 12.21 billion shares, the highest in over a month.

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Comments by Treasury Secretary Janet Yellen on the potential need for interest rate hikes further exacerbated the tech selloff, 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.

The S&P/TSX Composite Index closed down 25.13 points, or 0.13%, at 19,188.03. Consumer staples and energy were among the most bruised sectors, declining 0.46% and 0.61%, respectively. The tech sector in Toronto closed with a slight 0.02% gain, thanks to a 2.23% rally in shares of Shopify. Ballard Power Systems was easily the worst performer, plunging 19.52% after a disappointing earnings report. Bausch Health Companies also had a rough session, dropping 10.73% after reporting earnings and saying it is preparing to spin off its eyecare business this fall.

On Wall Street, materials and financials extended their Monday gains, up by 1% and 0.7%, respectively, as investors continued to rotate money into cyclical sectors.

The Nasdaq Composite dropped 261.62 points, or 1.88%, to 13,633.50, while the S&P 500 lost 28 points, or 0.67%, to 4,164.66.

The Dow Jones Industrial Average pared its earlier losses and closed slightly higher, rising 19.8 points, or 0.06%, to 34,133.03.

“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, adding investors look for clarity on economic recovery from Friday’s nonfarm payroll report.

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Fiscal stimulus, rapid vaccinations and the Federal Reserve’s accommodative stance have spurred a strong rebound in the U.S. economy and pushed Wall Street to record highs this year. The so-called “pandemic winners,” however, have recently started to fall out of favor.

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% in the quarter, compared with forecasts of a 24% growth at the start of April, according to IBES data from Refinitiv.

Declining issues outnumbered advancing ones on the NYSE by a 1.47-to-1 ratio; on Nasdaq, a 2.60-to-1 ratio favored decliners. The S&P 500 posted 97 new 52-week highs and no new lows; the Nasdaq Composite recorded 109 new highs and 99 new lows.

Oil prices rose after more U.S. states eased lockdowns and the European Union sought to attract travellers, though soaring COVID-19 cases in India capped gains.

Brent crude futures settled at $68.88 a barrel, up$1.32, or 1.95 percent. U.S. West Texas Intermediate (WTI) crude futures rose by $1.20, or 1.86%, to settle at $65.69 after a 1.4% jump on Monday.

“Markets were optimistic coming into the day, boosted by flight movement between U.S. and Europe,” said Phil Flynn, senior analyst at Price Futures Group in Chicago. Demand for diesel fuel, including jet, has suffered during the pandemic, weighing down global oil markets.

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Prices are being supported by the prospect of a pick-up in fuel demand as New York state, New Jersey and Connecticut look to ease pandemic curbs and the EU plans to open up to foreign visitors who have been vaccinated, analysts said.

Read more:

Stocks that saw action on Tuesday - and why

RBC revises outlook for U.S. stocks - and it’s not alone

Reuters, Globe staff

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