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US STOCKS-Slump in Tesla, Apple hits Wall St as tech rout deepens

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* Tesla tumbles after not being included in S&P 500

* GM jumps after taking stake in electric-truck maker Nikola

* Sell-off in FAANG stocks resumes

* Fears over U.S. sanctions on SMIC pressure chip stocks

* Indexes off: Dow 1.96%, S&P 2.36%, Nasdaq 3.35% (Updates to open)

Sept 8 (Reuters) - The Nasdaq plunged another 3% on Tuesday as investors sold off shares of Tesla and other tech heavyweights, while simmering U.S.-China tensions and concerns over a rocky economic rebound also weighed on sentiment.

All eleven major S&P sectors fell in early trading, with energy and information technology stocks leading declines.

Wall Street’s tech-fueled rally halted last week with the Nasdaq closing 6% below its record closing high. Investors booked profits, taking advantage of a stimulus-fueled rally that lifted the index about 70% from its pandemic-induced low in March.

Shares of Facebook Inc, Amazon.com Inc, Apple Inc, Netflix Inc and Google-parent Alphabet Inc — commonly known as the “FAANG” group of stocks — fell between 1.9% and 4.8%.

Tesla Inc plunged 18.3% and was set for its worst day in nearly six months after the electric-car maker was excluded from a group of companies being added to the S&P 500.

Still, market participants said they did not expect a prolonged sell-off against the backdrop of an accommodative monetary policy by the Federal Reserve, which last week indicated a higher toleration for inflation rising above 2%.

“I don’t think the market will correct in a big way,” Peter Cardillo, chief market economist at Spartan Capital in New York, told the Reuters Global Markets Forum.

“That is because the powerhouse of this rally is the Fed (and) there is essentially no place to put your money except stocks.”

Media reports said SoftBank made significant option purchases during the run-up in U.S. stocks, reminding investors that market makers might have billions of dollars worth of long positions as hedges against options trades, which will have to be sold as prices fall.

“If you bought a lot of call options in the second quarter, you’re doing very well, but that creates a problem for later when you need to unwind these positions,” said Ken Peng, Citi Private Bank’s head of Asia Investment Strategy.

Peng added that the six largest U.S. technology stocks now comprise 15% of the global market capitalization, all but squeezing shorts out completely.

At 9:48 a.m. ET, the Dow Jones Industrial Average was down 551.10 points, or 1.96%, at 27,582.21, the S&P 500 was down 80.84 points, or 2.36%, at 3,346.12, and the Nasdaq Composite was down 378.78 points, or 3.35%, at 10,934.35.

Fears over potential U.S. sanctions against China’s biggest chipmaker SMIC hit domestic suppliers, with Applied Materials Inc, Lam Research Corp and KLA Corp dropping between 6.6% and 7.3%.

General Motors Co jumped 4.9% after it acquired an 11% stake, worth $2 billion, in U.S. electric-truck maker Nikola Corp. The truck maker’s shares surged more than 28.8%.

U.S. President Donald Trump and Democratic rival Joe Biden are set to visit battleground states this week as some opinion polls show the race tightening with less than 60 days to go until the Nov. 3 election.

Declining issues outnumbered advancers for a 7.06-to-1 ratio on the NYSE and a 5.31-to-1 ratio on the Nasdaq.

The S&P index recorded no new 52-week high and two new lows, while the Nasdaq recorded 10 new highs and 27 new lows. (Reporting by Medha Singh and Devik Jain in Bengaluru; Additonal reporting by Tom Westbrook in Singapore and Divya Chowdhury in Mumbai; Editing by Bernard Orr, Sagarika Jaisinghani and Shounak Dasgupta)

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