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