CORRECTED-US STOCKS-Nasdaq slumps as high-flying tech stocks retreat

(Corrects to show S&P 500 energy index did not hit record high)
* U.S. private payrolls rise less than expected in Feb
* Financials and energy among rising sectors
* Indexes: Dow +0.17%, S&P 500 -0.69%, Nasdaq -2.10%

By Noel Randewich
March 3 (Reuters) - The Nasdaq fell sharply on Wednesday as
investors sold high-flying technology shares and pivoted to
sectors viewed as more likely to benefit from an economic
recovery on the back of fiscal stimulus and vaccination
programs.
Microsoft Corp MSFT.O , Apple Inc AAPL.O and Amazon.com
Inc AMZN.O dropped more than 1% each, weighing more than any
other stocks on the S&P 500.
Energy .SPNY , financial .SPSY and industrial .SPLRCI
stocks gained between 0.8% and almost 3%. The financial and
industrial indexes reached intra-day record highs. Most other
S&P sectors declined.
The Russell 1000 value index .RLV , which leans heavily on
economy-linked sectors, rose 0.3%, while its growth index
.RLG , comprising large tech companies, fell 0.3%.
"Today is the perfect encapsulation of the big theme we've
been seeing in the past couple of months: The vaccine rollout is
going well and the economy improving, and that is sending yields
and rate expectations higher, which is hurting growth stocks,"
said Baird investment strategist Ross Mayfield, in Louisville,
Kentucky.
The U.S. economic recovery continued at a modest pace over
the first weeks of this year, with businesses optimistic about
the months to come and demand for housing "robust," but only
slow improvement in the job market, the Federal Reserve
reported.
While the vaccine distribution is expected to help the
economy, data showed U.S. private employers hired fewer workers
than expected in February, suggesting the labor market was
struggling to regain speed. Another report showed U.S. services industry activity
unexpectedly slowed in February amid winter storms, while a
measure of prices paid by companies for inputs surged to the
highest level in nearly 12-1/2 years. The U.S. 10-year Treasury yield US10YT=RR ticked up to
1.47%, pressuring areas of the market with high valuations. It
was still off last week's peak of above 1.61% that roiled stock
markets as investors bet on rising inflation.
Rising interest rates disproportionately hurt high-growth
tech companies because investors value them based on earnings
expected years into the future, and high interest rates hurt the
value of future earnings more than the value of earnings made in
the short term.
"There is a definite headwind for equity markets if yields
go above the 1.5% level with most investors keeping an eye on
the pace of yield growth," said Michael Stritch, chief
investment officer at BMO Wealth Management.
The U.S. Senate is expected to take up Biden's $1.9 trillion
coronavirus relief package on Wednesday, with Democrats aiming
to get it signed into law before March 14, when some current
jobless benefits expire. In afternoon trading, the Dow Jones Industrial Average
.DJI was up 0.17% at 31,444.42 points, while the S&P 500
.SPX lost 0.69% to 3,843.67.
The Nasdaq Composite .IXIC dropped 2.1% to 13,078.15.
Exxon Mobil Corp XOM.N rose 2% after the oil major
unveiled plans to grow dividends and curb spending with
projections that were less bold than previous years.
Declining issues outnumbered advancing ones on the NYSE by a
1.05-to-1 ratio; on Nasdaq, a 1.75-to-1 ratio favored decliners.
The S&P 500 posted 62 new 52-week highs and no new lows; the
Nasdaq Composite recorded 270 new highs and 50 new lows.