Commenting on Tesla’s double-digit drop and today’s trading Gorilla Trades strategist Ken Berman said:
The major indices are all trading lower at midday, following a clearly bearish overnight session that saw another dip in the market-leading tech sector. While the Nasdaq staged a rebound ahead of the long weekend on Friday, the worrisome European COVID picture and the U.S.-Chinese tensions continue to weigh heavily on risk assets, with the bearish momentum of the past week also taking its toll. Tesla’s (TSLA, - 13.6%) double-digit drop, which was triggered by the news that the stock won’t be included in the S&P 500, weighed heavily on the tech sector, with the other tech-giants also being hit hard.
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Tesla double digit drop and beyond
President Trump suggested in his Labor Day speech that the U.S. should “decouple” from China, sparking a sell-off in stocks exposed to China and global trade. The pre-market session was also plagued by the downbeat reports concerning the ongoing Brexit talks, which suggest that a no-deal Brexit is increasingly likely, with the dismal Italian retail sales release adding to the selling pressure. In domestic economic news, the NFIB Small Business Index beat expectations following last month’s disappointment, and while the IBD/Tipp sentiment number was slightly lower-than-expected, the U.S. economic outlook remains positive.
Dow: 27,732, - 401 or 1.4%
S&P 500: 3,340, - 57 or -1.7%
Nasdaq: 11,076, - 237 or 2.1%
Russell 2000: 1,512 - 23 or 1.5%
Market breadth has been weak in early trading, with decliners outnumbering advancing issues by a 7-to-1 ratio on the NYSE at midday. 30 stocks hit new 52-week lows on the NYSE and the Nasdaq, while only 15 stocks hit new 52-week highs. The major indices have been hovering around their daily VWAPs (Volume-Weighted Average Price) throughout the morning session, pointing to a mixed and choppy afternoon. This morning’s selloff has been broader-based than last week’s tech-led plunge, with the key cyclical sectors and energy and financial stocks, in particular losing substantial ground, suggesting that the oversold correction will continue. Stay tuned!