The ferocious reversal in red-hot tech names such as Nvidia (NVDA - Get Report) , AMD (AMD - Get Report) , Amazon (AMZN - Get Report) and Apple (AAPL - Get Report) on Friday will likely still be in focus this week by investors who are growing worried about a short-term pullback in the markets.
"Growth and large-cap tech have massively outperformed value since the start of the year -- reversion to the mean is a powerful force," David Nelson, chief strategist of Belpointe Asset Management told TheStreet. "The so called Trump trade -- which is made up of mostly value stocks such as financials and industrials -- stalled, and perhaps the Comey testimony with no smoking gun was the trigger to unwind that trade."
S&P 500 futures were down 0.04% as of 9:53 p.m. EST on Sunday. Nasdaq futures fell 0.12%, while Dow futures shed 0.05%.
"Markets go up and down, the "trend" can push valuations too far in one direction or the other and, when they do, sharp corrections ensue," TS Lombard managing director Steven Blitz said of Friday's swift downdraft in the tech space.
Added Blitz, "Tech is just another of many sectors, albeit a high profile one because of the names in the sector, subject to the fear and greed of market participants. In other words, Friday's downswing is probably nothing more meaningful than a re-balancing of market sentiment."
The profit-taking in tech arrives ahead of a decision on interest rates by the Federal Reserve on Wednesday. Fed chair Janet Yellen will also hold a press conference with reporters. While it's largely expected the Fed will hike interest rates, there are concerns on Wall Street as to what Yellen will say.
"Most members of the Fed support removal of accommodation so the real surprise would be if they did nothing," Nelson said. "The commentary that follows will be the real focus for investors -- the pace of tightening and how fast they intend to unwind the balance sheet will all be questions for Fed Chair Yellen in the press conference that follows."
Goldman Sachs wrote on Saturday that it expects the Fed to begin unwinding its $4.5 trillion balance sheet in September.