S&P 500 Loses $1 Trillion As Tech Selloff Picks Up: Markets Wrap
In only four days, the S&P 500 lost about $1 trillion.
A week-long selloff in technology stocks worsened, saddling investors with the biggest losses since April, as traders bailed out of the highest-priced companies before Federal Reserve guidance on rates.
In only four days, the S&P 500 lost about $1 trillion. Concerns about overstretched valuations in tech giants at a time when the Fed may not deliver the magnitude of policy easing forecast earlier in the year spurred a continued slide in equities from all-time highs.
Tech stocks swoon.
All megacaps retreated, with Nvidia Corp. extending a two-day plunge to 5%. The Nasdaq 100 slid 1%. The S&P 500 fell for a fourth straight session. After almost doubling this year, Palantir Technologies Inc. tumbled 20% in six days.
Matt Maley at Miller Tabak says he’ll be looking for clues on whether this rout is just a hiccup or something more concerning.
“We’re going to have to see more downside follow-through before we raise any yellow warning flags,” he said. “Investors could become very nervous, very quickly, if the tech sector - and thus the market - do indeed start to see a material decline.”
US stocks are “in the early days” of a bubble, although the critical point for a correction has yet to come, Oaktree Capital Management LP co-founder Howard Marks cautioned.
“I’m certainly not ringing the alarm bells. The point is that things are expensive,” he told Bloomberg Television.
As traders geared up for Jerome Powell’s speech in Jackson Hole on Friday, bonds saw mild gains, with 10-year yields falling two basis points to 4.28%.
To Mark Hackett at Nationwide, investors are showing fatigue following a 30% rally since April.
“We’re seeing a notable drop in leadership, with large-cap growth significantly lagging small caps and value this month,” Hackett said. “Still, volatility and credit spreads remain calm, suggesting investors’ fears are modest.”
Megacap companies had led the stock market for months, thanks to a growing demand for artificial intelligence products and cloud-computing services. Some strategists now warn that the their extra-heavy weight could turn the rotation out of the sector into a broader stock-market rout.
“Rotation can only take place if the tech stocks hold up,” said Maley at Miller Tabak. “If they decline, the only rotation we’ll see will be into cash.”
For some investors, profit-taking has taken precedence over continued risk taking, amid concerns about valuations becoming stretched, according to Fawad Razaqzada at City Index and Forex.com. Still, the downside is likely to be limited even for tech names.
“Whether the tech sector will break to new highs on the back of Powell’s comments remains to be seen,” Razaqzada noted. “In any case, global central banks are easing policy, and this is keeping the global stock markets supported.”
The slide in US stocks is creating an opportunity to “buy-the-dip,” according to JPMorgan Chase & Co.’s trading desk.
“Today feels like a test for the dip-buyers with data on PMIs on Thursday and Federal Reserve Chair Jerome Powell at Jackson Hole may prove to be market movers/narrative changers,” Andrew Tyler, head of global market intelligence at JPMorgan, wrote in a note to clients Wednesday.
To Carol Schleif at BMO Private Wealth, stock valuations are full right now leaving little wiggle room for disappointment.
“The stock market is currently discounting a bright future ahead, and that assessment is largely justified thanks to earnings, which have been much stronger than originally expected and increasing clarity on trade and tax policy,” she said.
Corporate Highlights:
Microsoft Corp. has curtailed Chinese companies’ access to advance notifications about cybersecurity vulnerabilities in its technology after investigating whether a leak led to a series of hacks exploiting flaws in its SharePoint software.
Target Corp. named veteran Michael Fiddelke as its next chief executive officer, betting that the insider will revive the storied retailer struggling with weak sales.
Off-price retailer TJX Cos. raised its full-year earnings per share outlook after better-than-expected results, a sign that shoppers wary of economic uncertainty are turning to discounters.
Estée Lauder Cos. issued a weak profit outlook for its fiscal year, dragged down in part by tariff costs.
The firm said it has hired external advisors to conduct a review of the brands it owns in a bid to accelerate a turnaround after years of sales declines.
Lowe’s Cos. agreed to buy Foundation Building Materials for about $8.8 billion in cash, accelerating the home-improvement supplier’s push to serve more professional customers.
Guess? Inc. will be taken private by Authentic Brands Group LLC in partnership with co-founders Maurice and Paul Marciano and Chief Executive Officer Carlos Alberini.
Luxury builder Toll Brothers Inc. missed analysts’ estimates for quarterly orders as affordability challenges and economic uncertainty held back buyers.
Thoma Bravo is in advanced talks to buy human resources software provider Dayforce Inc. in what would be one of the takeover firm’s largest-ever deals.
Alaska Air Group Inc. debuted a new loyalty program that will let members choose from three options to earn award points, the first such offering in the US industry.
Novo Nordisk A/S implemented a global hiring freeze as the Danish drugmaker seeks to cut costs and regain its footing in the competitive market for weight-loss treatments.
Baidu Inc.’s revenue slipped slightly, hurt by an economic downturn that’s capping its ability to fight bigger rivals in AI and make inroads in new growth areas.
SQM, the world’s biggest lithium producer by market value, boosted its sales guidance for this year and struck a note of optimism on prices after posting a 28% slump in second-quarter core earnings.
Some of the main moves in markets:
Stocks
The S&P 500 fell 0.6% as of 12:58 p.m. New York time
The Nasdaq 100 fell 1%
The Dow Jones Industrial Average fell 0.1%
The MSCI World Index fell 0.4%
Bloomberg Magnificent 7 Total Return Index fell 1.6%
The Russell 2000 Index fell 0.6%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro rose 0.1% to $1.1660
The British pound fell 0.2% to $1.3460
The Japanese yen rose 0.4% to 147.11 per dollar
Cryptocurrencies
Bitcoin rose 0.2% to $113,799.97
Ether rose 3.4% to $4,298.22
Bonds
The yield on 10-year Treasuries declined two basis points to 4.28%
Germany’s 10-year yield declined three basis points to 2.72%
Britain’s 10-year yield declined seven basis points to 4.67%
The yield on 2-year Treasuries declined three basis points to 3.72%
The yield on 30-year Treasuries was little changed at 4.90%
Commodities
West Texas Intermediate crude rose 1.6% to $63.32 a barrel
Spot gold rose 0.9% to $3,345.23 an ounce
