US tech stocks plunge ahead of eventful week
Fawad Razaqzada June 9, 2017 6:49 PM
US technology stocks took a big plunge today, causing the Nasdaq 100 index to drop 1.5% from a fresh record high that it had hit earlier in the day.
Well, no one saw that coming (!)
US technology stocks took a big plunge today, causing the Nasdaq 100 index to drop 1.5% from a fresh record high that it had hit earlier in the day. Technology stocks have been rallying aggressively in recent times, as momentum-chasing speculators bought names such as Alphabet, Amazon, Apple, Facebook and et al. like there was no tomorrow. These and a few other stocks have been holding up the entire US stock markets. But such bullish runs often end abruptly and that is what may have happened today. The writing was on the wall. Insider selling from the likes of Jeff Bezos, Chief Executive Officer of Amazon, is never a good sign. The eye-catching gains promoted Bank of America analysts to label the whole sector as being the "most overweight it has ever been", surpassing even the dot com bubble.
The technology sector needs to be watched closely in early next week as it was the leader in the rally. Now that the sector is falling, it could drag the major indices lower and undermine investor confidence in other sectors. The new week promises to be just as volatile as the end of this one: for we will have several central bank meetings and plenty of market-moving data to look forward to. Some of the key highlights for next week are as follows:
- Tuesday: UK CPI and German ZEW Economic Sentiment
- Wednesday: Chinese Industrial Production; UK Average Earnings Index; US CPI and retail sales and FOM
- Thursday: New Zealand GDP; Australian employment data; SNB; BoE and UK retail sales
- Friday: BOJ and Canadian retail sales
As can be seen, there’s something for everyone, but the key event is probably going to be the much-anticipated Federal Reserve meeting on Wednesday. The Fed is widely expected to raise interest rates by another 25 basis points. But it will probably accompany this rate rise by delivering a dovish statement. If the Fed comes across as more hawkish than expected, then this could be further bad news for stocks.
But despite the big sell-off, it is far too early to say whether a sizeable correction will now begin. This could just be a mere pause in what still is a strong bullish trend for the Nasdaq 100. But it is an eye-catching drop nonetheless and if we see further breakdown of support levels then things could get ugly really quickly.
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