S&P 500 Loses $1 Trillion As Tech Selloff Picks Up: What Indian Investors Need to Know
A week-long selloff in technology stocks worsened, saddling investors with the biggest losses since April, as traders bailed out of the highest-priced companies before Federal Reserve guidance on rates.
Tech Stocks Swoon
In only four days, the S&P 500 lost about $1 trillion. Concerns about overstretched valuations in tech giants at a time when the Fed may not deliver the magnitude of policy easing forecast earlier in the year spurred a continued slide in equities from all-time highs.
Tech stocks swoon. All megacaps retreated, with Nvidia Corp. extending a two-day plunge to 5%. The Nasdaq 100 slid 1%. The S&P 500 fell for a fourth straight session. After almost doubling this year, Palantir Technologies Inc. tumbled 20% in six days.
Expert Insights
Matt Maley at Miller Tabak says he’ll be looking for clues on whether this rout is just a hiccup or something more concerning.
“We’re going to have to see more downside follow-through before we raise any yellow warning flags,” he said. “Investors could become very nervous, very quickly, if the tech sector – and thus the market – do indeed start to see a material decline.”
US stocks are “in the early days” of a bubble, although the critical point for a correction has yet to come, Oaktree Capital Management LP co-founder Howard Marks cautioned.
“I’m certainly not ringing the alarm bells. The point is that things are expensive,” he told Bloomberg Television.
Market Outlook
As traders geared up for Jerome Powell’s speech in Jackson Hole on Friday, bonds saw mild gains, with 10-year yields falling two basis points to 4.28%.
To Mark Hackett at Nationwide, investors are showing fatigue following a 30% rally since April.
“We’re seeing a notable drop in leadership, with large-cap growth significantly lagging small caps and value this month,” Hackett said. “Still, volatility and credit spreads remain calm, suggesting investors’ fears are modest.”
What Indian Investors Need to Know
Megacap companies had led the stock market for months, thanks to a growing demand for artificial intelligence products and cloud-computing services. Some strategists now warn that the their extra-heavy weight could turn the rotation out of the sector into a broader stock-market rout.
“Rotation can only take place if the tech stocks hold up,” said Maley at Miller Tabak. “If they decline, the only rotation we’ll see will be into cash.”
For some investors, profit-taking has taken precedence over continued risk taking, amid concerns about valuations becoming stretched, according to Fawad Razaqzada at City Index and Forex.com. Still, the downside is likely to be limited even for tech names.
“Whether the tech sector will break to new highs on the back of Powell’s comments remains to be seen,” Razaqzada noted. “In any case, global central banks are easing policy, and this is keeping the global stock markets supported.”
Opportunities for Indian Investors
The slide in US stocks is creating an opportunity to “buy-the-dip,” according to JPMorgan Chase & Co.’s trading desk.
“Today feels like a test for the dip-buyers with data on PMIs on Thursday and Federal Reserve Chair Jerome Powell at Jackson Hole may prove to be market movers/narrative changers,” Andrew Tyler, head of global market intelligence at JPMorgan, wrote in a note to clients Wednesday.
To Carol Schleif at BMO Private Wealth, stock valuations are full right now leaving little wiggle room for disappointment.
“The stock market is currently discounting a bright future ahead, and that assessment is largely justified thanks to earnings, which have been much stronger than originally expected and increasing clarity on trade and tax policy,” she said.
Key Takeaways for Indian Investors
- The S&P 500 has lost over $1 trillion in just four days as a tech selloff worsens.
- Indian investors should be cautious and consider the potential risks and opportunities in the current market.
- Expert insights suggest that the market may be due for a correction, but the timing and severity are uncertain.
- Indian investors should consider diversifying their portfolios and looking for opportunities to buy the dip.
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