A sell-off in tech stocks could heal the market
Thursday’s stock losses were seen by some traders as a warning sign. In recent weeks, aggressive buying of technology and rising stocks has affected the options markets.
«Crazy demand in the middle of the week became the strongest recently», – said Julian Emmanuel, Head of Equity and Derivatives Strategy Department, BTIG.
The energy sector sank 0.7%, and its financials fell 1.6%, compared with a 5.8% decline (the first in 11 trading sessions) in information technology..
«I think today’s sale is a banal profit-taking. I doubt it will last long. The current situation hardly speaks of a weakening economy. We just need to catch our breath», – said Tom Lee, founder of Fundstrat.
Art Cashin from UBS, believes vaccine information has impacted the tech sector.
«The sector’s pullback may have been fueled by reports that the White House has sent messages to major cities in key states asking them to prepare for a massive vaccine rollout as early as mid-October. It is not a fact that this is what provoked a rapid growth in sales, but I do not exclude that this information played a role.», – posted by Cashin.
Tom Lee said there is a theory that the vaccine will revive the segments most affected by the pandemic. In this case, the tech sector may experience an increase in profits..
Stock markets have attracted many new individual investors since March 23.
«The Nasdaq appears to be gearing up to explode, which means the exchange could turn into a bubble that will eventually lead to an even bigger sell-off. Nasdaq is up 83% this week. It is perfectly reasonable to expect it to be sold out. This should make the marketplace healthier.», – added Lee.
Many cloud and semiconductor companies, as well as software developers fell victim to Thursday on Nasdaq.
However, the papers of such tech giants as, for example, Apple and Amazon – considered a safe haven for the investor. High incomes and hectic activity even during the pandemic played an important role in this..
There has been speculative frenzy surrounding the split between Tesla and Apple shares. These decisions should not have led to such a reaction from investors, experts say.. Apple shares jump more than 30% after split announced.
«Until this year, the split of shares did not matter much. Now, all of a sudden, market participants see many important signals in this action.», – said Lee.
Julian Emanuel suspects that the market could also assume the role of a pricing authority in the absence of incentives from Washington. The fact is that Congress continues to disagree on the size of the next package of assistance to the unemployed and companies affected by the coronavirus.. Emanuel believes that further sale could force Congress to sit down at the negotiating table and make a decision.