Stocks sold off again Monday, but with losses in high-growth tech stocks abating, while cyclical value stocks took the lead in the down-move. The biggest losers in the Dow Jones Industrial Average highlight the market dynamic.
The S&P 500 fell 2%, with the tech-heavy Nasdaq down 1%. The 10-Year Treasury yield fell to 0.66%. Yields fall when prices rise. The price of crude oil fell 4.9% to $39 a barrel.
Growth tech stocks are receiving a considerable rerating of valuation, as the Nasdaq 100 is now down almost 3% since September 2. Tech stocks had run up to stratospheric valuations this year on accelerated demand for at-home services, which are also high-growth areas.
Now, many are wondering whether there has been a massive pull-forward of demand, which makes later years far less growth-like than the next few years are. Apple (AAPL) - Get Report, which has an app store and streaming business primed for user adoption, especially in the at-home environment, was trading at almost 40 times earnings before September 2, against an expected earnings growth rate annually of no more than 10%. The stock is down almost 25% since that date. But Apple was down more than 1% in the morning, before the stock entered the green slightly by midday, a move echoed by some other tech stocks.
Meanwhile, the Vanguard S&P 500 Value ETF VOOV, home to both cyclical and defensive names which tend to exhibit more muted movements, fell 3%.
Coronavirus infections in the U.S. have spiked again. After having cooled off from the summer surge, the 7-day moving average of daily new cases in the U.S. is 42,000, up from 35,000 almost a month ago. Small businesses are still shut down or not fully opened across the country, interest rates cannot fall from currently rock bottom levels, corporate borrowing is exhausted from earlier in the year and Congress seems to have dying political will to pass more or sufficient fiscal stimulus.
Here were the 5 biggest losers on the Dow Jones Industrial Average just before noon EDT Monday:
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