Nasdaq falls 3.5% as tech stocks continue their slide
The exchange's decline over three days topped 10 per cent after a surge from March lows stretched valuations
The selloff in US shares picked up steam on Tuesday, with large technology stocks plunging 4 per cent as investors piled out of companies that led a torrid five-month rally. European equities fell and the pound weakened for a fifth day.
The Nasdaq 100’s three-day slide topped 10 per cent after its surge from March lows stretched valuations toward levels last seen in the dot-com era. Tesla plunged 15 per cent after being snubbed for inclusion in the S&P 500 and is now down more than 25 per cent in September. All 11 S&P 500 groups retreated.
Investors have recently turned skittish that the speculative fever that drove huge bullish bets in options markets and saw shares in bankrupt companies surge had finally gone too far. Now strategists are debating whether the pullback is a sign of market health or the start of a larger drawdown that has further to go.
“Some froth has come off the market which is a good thing, but keep in mind that we still remain well over levels that could be considered ‘fair value’ in stocks,” Tom Essaye, a former Merrill Lynch trader who founded The Sevens Report newsletter, wrote in a note. “And while the outlook for stocks remains generally constructive long term, there’s a lot more downside in this market if we get any major disappointments.”
For now, traders sought the safety of haven assets, pushing Treasury yields lower and strengthening the dollar. Oil approached $40 a barrel in London and gold declined.
The US-China relationship is also back in focus after President Donald Trump said he plans to end America’s reliance on the country. Mr Trump also threatened to punish any American companies that create jobs overseas, and to forbid those that do business in China from winning federal contracts.
“The path of least resistance for the market may well be to test the downside,” said Peter Chatwell, head of multi-asset strategy at Mizuho International, said. “Ultimately, if there is more selloff, I suspect real money investors will take the opportunity to buy the dip.”
In the UK, the pound weakened and stocks slumped after Prime Minister Boris Johnson vowed he “won’t back down” over sticking points in Brexit trade talks with the EU.
Elsewhere in markets, the Turkish lira weakened to an all-time low against the dollar for a fourth session amid concern that monetary policy remains too loose to backstop the currency.
Equities rose in Asia, with shares in Australia and South Korea leading the advance.
Published: September 8, 2020 07:42 PM