Commenting on the selloff in the tech sector and today’s trading Gorilla Trades strategist Ken Berman said:
Selloff In The Tech Sector
The major indices are all trading significantly lower at midday with the Nasdaq and the tech sector leading the morning selloff on Wall Street. The likes of Facebook (FB, -5.9%), Apple (AAPL, -7.2%), Tesla (TSLA, -8.2%), Amazon (AMZN, -5.3%), and Microsoft (MSFT, -5.7%) have been all hit hard in early trading as the short-term trends reversed in the sector. The wave of selling in the Nasdaq pushed the Volatility Index (VIX) near the 30 level while dragging the Dow and the S&P 500 lower as well, amid the positive economic surprises which put pressure on “work-from-home” stocks.
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The much better-than-expected weekly jobless claims report definitely played a part in the pullback in the tech sector, as both the number of new and continuing claims were much lower than last week. New claims fell below 900,000, while continuing claims came in just above 13 million, thanks to a drop of over 1 million. The ISM nonmanufacturing PMI was a tad below the consensus estimate, at 56.9, but the indicator still confirms the strong rebound in the services sector, and together with Monday’s manufacturing measure, it could provide support for stocks in the coming weeks.
Dow: 28,475, - 625 or -2.2%
S&P 500: 3,467, - 114 or 3.2%
Nasdaq: 11,528, - 529 or 4.4%
Russell 2000: 1,542 - 50 or 3.2%
Market breadth has been relatively strong in early trading, with decliners only outnumbering advancing issues by a 3-to-2 ratio on the NYSE at midday. 19 stocks hit new 52-week lows on the NYSE and the Nasdaq, while 37 stocks hit new 52-week highs. The major indices have been trading below their daily VWAPs (Volume-Weighted Average Price) for most of the morning session, pointing to intraday selling pressure. Selling has been concentrated in the stretched tech sector, with cyclical issues performing much better on average, which suggests that a profit-taking event is underway following the memorable run-up of the recent weeks. Stay tuned!