NEW YORK ( Real Money) -- If you were out of the country without access to the Internet or cable and came back this weekend and looked at the major indices, you can be excused for thinking last week was a quiet and uneventful one in the stock market. Both the Dow Jones Industrial Average and the S&P 500 were down less than half a percent on the week.
However, under the surface, the market was anything but calm. The Nasdaq was down 1.7% on the week and only a big rally on Friday kept the biotech sector from posting even bigger losses. Even so, the main biotech indices are down some 5% over the past two weeks. Small biotech stocks have posted even deeper declines.
In addition, other high-beta sectors broke down, with the carnage in the social media space being particularly brutal, with Yelp (YELP), LinkedIn (LNKD) and Twitter (TWTR) all losing more than 20% on the week as each posted disappointing results and/or offered tepid guidance. Given that all three of these stocks still sell at huge valuations based on near-term earnings prospects, declines could easily extend during trading this week.
With revenue and earnings growth projected to be flat year over year in the first half of 2015 and the market selling at roughly 18 times trailing earnings, it is not hard to make the case the market overall is overbought at the moment.