U.S. tech stocks slumped into correction territory Tuesday, amid the biggest three-day decline since early March, as the world's hottest market continues to retreat amid concerns over high valuations and a fragile global recovery.
The Nasdaq Composite index was marked 3.2% lower in early afternoon trading Tuesday at 10,950 points, paced by a steep pullback for shares in Tesla Inc. (TSLA) - Get Report which was denied access to the benchmark S&P 500 late Friday. Tuesday's move puts the broadest measure of U.S. tech stocks some 8.5% south of the all-time high it reached on September 2. A market correction is typically defined as a fall of 10% from a recent high, which the Nasdaq recorded earlier in the session when it traded at 10,875.17 points.
The collective market cap of the Nasdaq 100, when it reached its all-time peak on September 2, was pegged at $9.3 trillion, a sum that was greater than the combined market of all European stocks that currently trade in the market.
Prior to last week's sell-off, which analysts are still trying find a catalyst for, the Nasdaq 100 had enjoyed an unprecedented rally from early March lows to add around $1.6 billion in market cap each and every hour, according to BofA Securities data, a sum that just outpaced the $1.4 billion in hourly financial asset purchases from global central banks.
The torrent of buying lifted the value of U.S. tech stocks, when compared to the returns on offer in U.S. government bonds, to the highest levels in nearly 100 years while pegging the combined market value of the biggest tech names -- Facebook (FB) - Get Report, Apple (AAPL) - Get Report, Amazon (AMZN) - Get Report, Microsoft (MSFT) - Get Report and Goggle (GOOGL) - Get Report-- at around 25% of the entire U.S. tech market, the highest concentration on record.
Apple, which has lost more than $180 billion in market value over the past three days, was marked 2.15% lower in early Tuesday trading, extending its five-day decline to 10%.
The Nasdaq Composite's 2020 rip, which has taken the index 82% higher from its March 23 low to its September 2 peak, has been a concern for analysts and investors, given that it was set against some of the steepest economic pullbacks on record and a U.S. unemployment rate of around 10%.
Microsoft, meanwhile, traded 2.55% lower at $208.75 each, pegging its five-day decline at $7.5%.
BofA Securities closely-watched global fund managers' survey, which tracks the views of investors holding around $600 billion in assets, has identified "long U.S. tech" as the market's most crowded trade for much of the past two years.
That creates at least some symmetry to the tech bubble of the early 2000s, which saw the Nasdaq fall 39.2% from its then-record peak.
Trailing P/E ratios for tech stocks at that time, data indicates, were hovering around 30x, a level that looks uncomfortably similar to the current ratio of 24x.