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Sell-off in US stock indices likely to be a blip

Sell-off in US stock indices likely to be a blip

The US stock market started 2021 on a weak footing, against a backdrop of rising coronavirus infection cases in the US and Europe, as well as a nationwide lockdown implemented in the UK until 15 February, to contain the ongoing spread of a mutated strain of Covid-19.

The S&P 500 shed -1.48%, its worst first day of the year performance since 2016, with similar negative magnitudes for the Nasdaq 100 (-1.50%), the Dow Jones (-1.25%) and the Russell 2000 (-1.47%). In addition, all S&P sectors were all in the red except for energy, which managed to squeeze out a meagre gain of +0.13%; underperformers were industrials (-2.55%), utilities (-2.60%) and real estate (-3.29%).

Interestingly, despite the sell-off in the broader US stock market, there were some silver linings. The leader of the electric vehicle (EV) space, Tesla, soared by +3.42% to close at another record a high at 729.77, after it missed its 2020 delivery target by only 450 vehicles, just shy of the 500,000 target set by CEO Elon Musk. After its inclusion into the S&P 500 on 21 December last year, Tesla has rallied by 12.3%, making it the fifth-largest weighted component stock in the S&P 500. The share price of NIO, a major Chinese EV maker listed on the NYSE, also surged, by +9.75%, after it reported record annual delivery for 2020, up 112% year-over-year to 43,728 vehicles.

Global growth proxies such as semiconductor stocks remained resilient. The PHLX Semiconductor ETF outperformed the S&P 500 with a minor loss of -0.42%, and CME copper futures rose by +1.03%.

Key Asian benchmark stock indices are currently standng firm and not catching the 'flu bug from the US. Japan’s Nikkei 225 lost just -0.09% (to 27,232), South Korea’s KOSPI 200 fell -0.01% (399.92), Hong Kong’s Hang Seng Index lost -0.17% (27,430), the Hang Seng TECH Index dropped -0.60% (8,439), and China’s CSI 300 rose +0.83% (5,311). It appears that yesterday’s sell-off in the major US stock indices is not likely to kick-start a medium-term downtrend.

Chart of the day – iShares PHLX Semiconductor ETF

The iShares PHLX Semiconductor ETF is poised for a potential bullish breakout.

Source: CMC Markets

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