We have witnessed a degree of carnage in US big tech stocks overnight, with Apple (-3.54%), Amazon (-2.2%), Microsoft (1.62%), Alphabet (-1.55%) and Facebook (-1.31%) all falling by more than 1%. Other technology/growth-related stocks, such as Tesla (-1.65%) and the iShares PHLX Semiconductor ETF (-1.69%), led the Nasdaq 100 to its worst daily loss since 18 March, down -1.85% to 13,544.
Cyclicals and value-related stocks provided support to prevent the US stock market from being torpedoed into the deep red sea, helping the Dow Jones Industrial Average squeeze out a small gain of 0.06% to 34,133, and trimming the early 1.5% loss inflicted on the S&P 500 to -0.67% at 4,164. The small-cap Russell 2000 declined by -1.28% to 2,248. Outperformers were materials (+1.04%), financials (+0.7%) and industrials (+0.41%).
Overall, there was no clear catalyst triggering the sell-off in technology and growth-related stocks; the Nasdaq 100 gapped down by -0.86% at yesterday’s open and traded with a loss of -1.76% after the first hour of the US session, before US treasury secretary Janet Yellen’s pre-recorded comment during the Atlantic’s future economy summit, that interest rates may need to rise over time to keep the US economy from overheating. The US 10-year treasury yield dropped by 2 basis points to 1.59%.
How about the “peak growth” coupled with the risk of another spike in global Covid-19 infection cases caused by the muted strain from India? There was no clear justification for such narratives, as other growth proxies such as oil prices have remained stable. WTI crude oil futures even recorded a gain of 1.9% to $65.70 per barrel at the close of yesterday’s US session; its best single day return since 14 April. Copper futures were almost unchanged at -0.15%.
In summary, yesterday’s movement in the technology/growth space is likely to be profit-taking related rather than the start of a major risk-off contagion. This after big tech stocks' Q1 earnings led the Nasdaq 100 to a monthly gain of 5.9% for April, beating the other major US stock indices for its best monthly return since November 2020.
From a technical analysis perspective there is also a bright spot, as yesterday’s earlier sell-off in the Nasdaq 100 to an intraday low of 13,396 managed to stall right above an upward sloping 50-day moving average, which is acting as a support at 13,335.