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The mega-cap stocks in the tech sector continue with another round of correction after a momentary pause on Wednesday. Investors have started fearing the possibilities of the next big tech bubble while analysts say that this is momentary turbulence with little signs of a deeper slide.
On Thursday, September 10, being boosted mainly by the tech sector, the broader markets entered another major correction with Dow Jones (INDEXDJX: .DJI) dropping over 400 points. The S&P 500 (INDEXSP: .INX) corrected 1.7% while the Nasdaq Composite (INDEXNASDAQ: .IXIC) corrected another 2% on the charts. Each of these three indices has corrected nearly 5-6% over the span of last week.
Thursday’s market crash comes after the indices showed some optimism on Wednesday from the previous Tuesday drop. Clearly, the markets are whimsical at this stage as there’s no clear direction ahead. Arian Vojdani, investment strategist at MV Financial, told CNBC:
“It’s a tricky market. You look up one second and the market’s down. You look down the other second and you’re back up. Investors would be remiss to try and trade on this right now”.
The tech sector continues to pull the markets down as some of the mega-cap companies enter a major correction. On Thursday, Apple Inc (NASDAQ: AAPL) shares corrected another 3.26% while Microsoft Corporation (NASDAQ: MSFT) and Facebook Inc (NASDAQ: FB) corrected over 2% each. The E-commerce giant and Wall Street’s favorite Amazon.com Inc (NASDAQ: AMZN) stock also corrected nearly 3%.
Investors have started taking a more cautious approach towards big-tech companies which have been the favorites for 2020. Analysts are saying that the valuations of the giant tech companies have reached historical-high-levels. Hence, we can expect a healthy correction going forward.
Will Tech Sector Push Dow and Other Indices Lowe?
There’s a massive buzz on Wall Street that we are possibly entering a new tech bubble anytime soon. The tech sector has single-handedly fueled markets after the March 2020 market crash led by the Coronavirus pandemic.
Investors are now having a more cautious sentiment for the tech sector at this stage. However, analysts think that is just some sort of turbulence instead of any deeper slide. Liz Young, the director of market strategy for BNY Investment Management, told CNBC that the market can regain its footprint in some time.
Young believes that some investors have still parked their cash on the sidelines waiting which should provide support for the stocks. “I don’t think we’re in a place now where you have to start selling rallies and taking exposure off the table,” said Young.
On the other hand, the health of the U.S. economy doesn’t look to be in a good shape. The latest data released by the Labor Department showed that the unemployment benefits and claims remained high.
It will be interesting to see that with more job losses in recent time, how does the economy take a turn during Q3 and Q4 of 2020.