Stocks continued to sell-off Tuesday in a down-move led by tech.
The S&P 500 fell 2%, with the Nasdaq 100 down 3.3%. Not much changed since the morning, although the losses did moderate a touch by 12:15 pm EDT. The Nasdaq 100 was down 3.5% in the morning. The 10-Year Treasury yield dipped further to 0.67% as financial markets are completely risk-off. The crude oil price fell 6.8% to $36 a barrel.
As tech valuations were incredibly stretched into late last week — and apparently SoftBank had been accumulated large positions in big tech — a sell-off began Thursday. The Nasdaq 100 is now down roughly 8% since Wednesday's close. Apple (AAPL) - Get Apple Inc. (AAPL) Report, which many note may have been the most overbought relative to earnings expectations, fell 4% to $115 a share (or $460 before the stock split). Tesla (TSLA) - Get Tesla Inc Report fell 15% to $355 a share.
On top of the tech sell-off, electric vehicle competitor Nikola (NKLA) - Get Nikola Corp. Report completed a deal with General Motors (GM) - Get General Motors Company (GM) Report, which will give Nikola access to its EV technology in exchange for a small equity stake. This is a “game changer” for Nikola, according to a note from Wedbush Securities' analyst Dan Ives, and a headwind to Tesla. Another near-term headwind to Tesla shares: the company won’t be included in the S&P 500, which means it won’t be included in funds mimicking the index, a negative for capital flows into the stock.
As for growth tech more broadly, “once you have momentum really driving the bus, it’s always hard to point your finger and say what’s going to dent that momentum?” Dan Eye, head of asset allocation and equity research at Fort Pitt Capital told TheStreet. "Maybe it’s time to take some gains.”
Cyclical stocks were also pressured, with all economically-sensitive sectors down considerably. Banks and oil were down 3.2% and 2.8%, respectively. Interest rates are near rock bottom and the continued speediness of the economic recovery hinges somewhat on more fiscal stimulus, which Congress is not only slow to move on, but may not have much more political will to spend as much as it did earlier in 2020.
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