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AGI – Wall Street, sunk by tech stocks that, after a long rally, were victims of a strong sell-off. The Nasdaq, driving the post-Covid rise, lost 4.96% to 11,458 points. The Dow Jones, which fell 2.78% to 28,365, and the S&P 500, which fell 3.51% to 3,459, were also strong. The Philadelphia chip and Standard & Poor’s tech sector are down about 5%.
After days of uninterrupted racing, the American roster has decided to take a break, marking its worst day since last June. Just yesterday, the Nasdaq and S&P 500 had reached their new all-time highs, while the Dow Jones had risen to just 1.5% from its peak. Investors ‘fear that the tech race has exceeded expectations and that many companies’ stocks are now traveling in unsustainable multiples is critical.
Apple fell 8.01% to $ 120.88. And the actions of the other Big Five fared only slightly better: Microsoft finished 6.19% down, Alphabet 5.12%, Amazon 4.63% and Facebook 3.76%. All the stars of the long journey in the sector have paid the tax, in particular those companies for which the crisis triggered by the pandemic represented a new growth opportunity.
Zoom, which no later than a couple of days ago even surpassed IBM by market capitalization, fell 9.97%. Netflix, the protagonist of the afternoons in lockdown, registered a thud of 4.90%. Tesla, in the third consecutive negative session after the main external shareholderBritish fund manager Baillie Gifford announced that it had reduced its stake from over 6% in June to 4.25% at the end of August, and it is back by 9.02%.
Somehow investors expected a correction in the sector, also concerned about the possibility of a second wave of coronavirus and an economy that shows signs of recovery but also too many uncertainties. And the good economic data released today was useless. Starting with that on new weekly unemployment benefits which have returned below 1 million to 881,000 units.
In fact, having surpassed the estimates of analysts, who expected 915,000 questions, may also have triggered the technical reaction of the markets, which fear a reduction in monetary stimulus.
Now it comes down to whether today was a simple correction or the end of a ‘bubble’. The Big Five alone accounted for about a third of Standard & Poor’s overall rebound from the negative peak reached in March during the close. And collectively, they capitalize more than $ 7 trillion, more than the entire Topix, the expanded index of the Japanese stock market.
Despite the new records, the shares of about 20% of companies listed on the S&P 500 still travel below their all-time highs by more than 50%. Only three sectors have outperformed the index so far this year, with technology, led by Apple, and the “consumer dictatorship”, “addicts” Amazon, taking the lion’s share.
For some time now, analysts have begun to warn of this divergence between ‘winners’ and ‘losers’. The fear of experts is that the rally has taken the shape of a K, with a small group of stocks going and a large part of the others unable to keep up. With the consequent risk that the dominance of the ‘Big Five’ could make the recovery of the list vulnerable, linked as it is to the destiny and strength of a small elite of companies.
