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Stock market crash?No, but the rotation away from U.S. tech stocks has shaken some investors

On the contrary, social media will recall the pandemic-inspired sale last March, let alone the 2008 global financial crisis, the 2000 dot-com bubble burst, or October 1987.

However, rotations from recent market leaders certainly appear to be underway, and volatile movements can be disturbing to some investors.

It could help explain why the term #stockmarketcrash is trending on Twitter, despite the Dow Jones Industrial Average.
DJIA,
-1.52%

And S & P 500
SPX,
-1.71%

It remains far from even entering what is known as a market correction, which is defined as a 10% pullback from the recent peak.

But the question investors should ask before ringing the alarm is whether price behavior is surprising or unusual, said Brad McMillan, chief investment officer of Commonwealth Financial Network, in a telephone interview. I told MarketWatch.

According to McMillan, the answer is no, given that bond yield backups, which appear to largely reflect increasingly bright economic expectations, are likely to be the main cause.

Nasdaq Composite Index, which makes heavy use of high-tech
COMP,
-2.43%

was Flirting in the orthodontic area, Dow Jones Industrial Average 30 species average
DJIA,
-1.52%
,
Gauges, which are popular in the US market, were less than 4% below last month’s record highs. The US large cap benchmark S & P 500 has fallen less than 5% from recent records.

The weakness of the market on Thursday reflected the wobble seen last week. Both bouts of selling were caused by the Treasury bond market sold out, which pushed up yields. Yield of 10-year government bond
TMUBMUSD10Y,
1.546%
,
It jumped to a year-long high of 1.6% last week and surpassed 1.5% on Thursday. Remarks by Federal Reserve Board Chairman Jerome Powell The potential rise in inflation, despite the central bank’s promise to boost the economy, did not seem to ease concerns that it could begin to curtail monetary stimulus faster than expected.

Nasdaq 2% or more down The Dow, which fell more than 700 points at session lows that day, remained down about 430 points (1.4%) on Thursday, while the S & P 500 fell 1.5%. They are a sharp daily decline, but not unusual.

McMillan said it was not uncommon for stock prices to begin to fall as yields began to rise. It’s also not surprising that high-priced growth stocks with increased valuations in the post-pandemic rally are bearing the brunt of selling pressure.

Investors seem to make a profit on these high flyers and use their profits to buy stock in companies in business cycle-sensitive sectors. Oversized weighting of technology and technology-related shares in key indexes can leave them vulnerable to weaknesses as the process takes hold.

Megatechnology and voluntary stock pricing behavior — Apple Inc.
AAPL,
-1.92%
,
Microsoft Corp.
MSFT,
-0.82%
,
Amazon.com Inc.
AMZN,
-0.92%
,
Facebook Inc.
FB,
+ 1.08%
,
Alphabet Inc, Google’s parent company.
Google,
+ 1.15%

Google,
+ 1.24%
,
Tesla, Inc.
TSLA,
-5.94%

And Nvidia Corp.
NVDA,
-3.97%

— Currently accounts for 24% of the S & P 500, said technical analysts Mark Arbeter, president of Arbeter Investments.

“The weaknesses of large cap technology focus on average market capitalization, raising concerns about the top of the market and the end of the cycle,” Renaissance Macro Research analyst Kevin Dempter said in a note Thursday. From our point of view, the breadth is still strong, a feature not usually found at the top of the market. “

Relation: The most sensitive sector of the stock market says the cycle isn’t close to turning around anywhere

Small cap discretionary stocks are absolute highs, the highest in years compared to large cap discretionary stocks, which is a sign of widespread participation, he said. Sectors that tend to win in high-yielding environments, such as energy and banking, are also more likely to benefit, as are economically sensitive groups such as transportation and services.

“I’m not at the top of the market, I think this is a rotation in nature and the downsides are limited. Banks, energy, etc. may have more outperformance in these groups in the future. We want to overweight the winners of our high yield bonds, “writes Dempter.

So what about that crash? The Dow continued to rise in 2021, down less than 5% from last month’s record high. That is, the most popular stock market gauges are not yet in the correction zone, which is usually defined as a decline. 10% from the recent peak. And it’s far from the bear market, which is defined as a 20% pullback.

Not all bear markets are the product of a crash — a more vague term, which means a sudden sharp fall. Some analysts define a crash as a daily reduction of 5% or more. Others see a typical crash as a sudden sharp drop that takes the market to a bear market with a few session issues and beyond.

This was the case last year as the COVID-19 pandemic revealed that the US and global economies would almost stop. The S & P 500 plunged from a record closing on February 19th, dropping about 34% before bottoming out on March 23rd.

Since these March lows, the S & P 500 has remained up 71.2%, while the Nasdaq has risen 68.9%. And even with the recent pullback, the Nasdaq continues to rise by more than 90% in that range.

Stock market crash?No, but the rotation away from U.S. tech stocks has shaken some investors

Source link Stock market crash?No, but the rotation away from U.S. tech stocks has shaken some investors

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