Stocks reversed course and fell midday Tuesday after posting strong gains in the morning. Shares of big tech companies, which have powered the market in the past few weeks, fell.
All three major U.S. indices fell by midday, with the S&P 500 down as much as 0.4%, after having seeing a 1.5% gain in the morning. Money fled into the safe 10 year treasury bond, sending the yield down to 0.62% from 0.66% Monday.
In the morning, news that the White House said it will get coronavirus testing to 2% of residents in each state brought the market higher. investors are generally optimistic that the virus’s spread will keep decelerating and that economic reopening will go smoothly. Stocks have looked past a rough 2020 and are pricing in a strong 20201 earnings rebound.
But since April 9, the S&P 500 had been led higher by shares of big tech, as investors find shelter in the secular growth trends in those companies, some of which can allude the negative impact of the virus-induced recession. Strategists point out, in fact, that an equal-weighted look at the S&P 500 shows a down move on the index since April 9, furthering highlighting big tech’s importance in the market.
Amazon (AMZN) - Get Report, Microsoft (MSFT) - Get Report, Google (GOOGL) - Get Report, Apple (AAPL) - Get Report, Netflix (NFLX) - Get Report and Facebook (FB) - Get Report, which had gained many times the percentage point gain of the S&P 500 since April 9, all fell at least 2% Tuesday. Those stocks combine for a market capitalization of several trillions of dollars. Big tech valuations have been reaching their richer levels heading into earnings.
The consumer may be faring better than feared, as consumer confidence plummets but nowhere near the levels seen in the 2008 financial crisis, partly aided by a swift and large fiscal and monetary stimulus package.
Importantly, Morgan Stanley’s Chief U.S. Equity Strategist Mike Wilson wrote in a recent note that the S&P 500 may meet technical resistance for the near-term at the 2,900 mark, which it touched in the morning.