por admin » Mar Sep 08, 2020 6:14 am
Nasdaq futures drop 2% following tech’s worst rout since March, Tesla falls 10%
PUBLISHED MON, SEP 7 20206:03 PM EDTUPDATED 18 MIN AGO
Yun Li
@YUNLI626
Eustance Huang
@EUSTANCEHUANG
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Wall Street points toward lower open following last week’s tech sell-off
Futures on the tech heavy Nasdaq-100 were set to fall sharply early Tuesday after technology shares suffered their worst sell-off in more than five months last week.
Nasdaq-100 futures fell 2.2%. Futures on the Dow Jones Industrial Average lost 0.2%. S&P 500 futures were off by 0.8%. U.S. markets were closed Monday in observance of Labor Day.
Here’s what traders are watching:
Tesla plunged 10% after the S&P Dow Jones Indices failed to add the surging and speculative stock to the S&P 500 after the bell Friday. Investors were betting on inclusion of the stock into the S&P 500, hoping for the stamp of approval on the rally by S&P. The snub shows the risks to the overeating Nasdaq trade.
Other hot Nasdaq stocks were hit hard in early trading. Facebook, Amazon, Netflix, and Google-parent Alphabet were all down 3% in premarket trading Tuesday. Nvidia was off 5%. Microsoft and Zoom Video also fell by 3%.
Shares of Softbank dropped 7% on Monday in Japan as it was identified as the big options buyer making a bet in the billions on tech stocks continuing to surge. The tech trade could lose some of its firepower if Softbank were to curb those bets.
There was a clear rotation out of the hot tech stocks and into stocks that would benefit from the economy reopening from the coronavirus. Shares of Disney, UPS and Ford were higher in premarket trading.
Drugmaker CEOs pledged to make safety the main priority in developing a coronavirus vaccine.
On Friday, stocks snapped a five-week winning streak after a big reversal in major technology stocks. Steep losses in Amazon, Apple, Microsoft and Facebook — 2020′s market leaders — drove the tech-heavy Nasdaq Composite down 3.3% to suffer its worst week since March 20. The Dow and the S&P 500 fell 1.8% and 2.3% last week, respectively, posting their biggest weekly losses since June.
Many on Wall Street believe the weakness derived from worries that the massive tech run-up pushed valuations to unsustainable levels. Even with last week’s pullback, the Nasdaq is up more than 70% from its March bottom.
“Given how extreme many of the indicators we follow had become by early this past week, we believe it will take more than just a mild decline to work off those conditions,” Matt Maley, chief market strategist at Miller Tabak, said in a note on Sunday. “Therefore we still believe a correction of more than 10% is probable.”
Maley pointed to the extreme overbought conditions in some of the mega-cap tech names as well as the elevated valuation levels for the S&P 500.
Last week’s Big Tech slump coincided with outperformance in cyclical stocks — names most sensitive to the economic recovery. The S&P 500 materials and financials sectors were the two biggest winners in the prior week, up 2.3% and 0.9%, respectively.
Amid the big rotation, the Cboe Volatility Index, known as the VIX or the market’s “fear gauge,” hit a high of 38.28 on Friday, its highest level since June 15. It was above 33 Tuesday morning.
Geopolitical developments could also weigh on investor sentiment. China accused the U.S. of “bullying” as it launched a global data security initiative on Tuesday. That came as Washington continues to pressure China’s largest tech firms and convince countries around the world to block them. President Donald Trump also recently entertained the idea of “decoupling” from China, or refusing to do business with the country.
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