As Wednesday unfolded, technology stocks were not just on a downward trajectory but plunging at a pace reminiscent of the darkest days of 2022. The Nasdaq 100, embodied by the Invesco QQQ Trust (QQQ), bore witness to a harrowing 3.6% retreat, its most severe single-session nosedive since October 2022.
For the first time since early May, the tech-heavy index dipped below its 50-day moving average, a critical support level that had stood strong since the waning days of October 2023, save for a fleeting fortnight between April and May.
Murmurs of concern rippled through the market as nearly 75% of Nasdaq 100 constituents painted the tape a telling shade of red. Amidst this tech tempest, industry titans stumbled. Alphabet Inc. (GOOG), the umbrella corporation of Google, watched its shares plummet by 4.9%, clouded by excess AI spending and lackluster YouTube ad revenue.
Tesla Inc. (TSLA), not to be left unscathed, saw its stock devalue by a staggering 12%, burdened by a 7% decline in auto revenue, a financial shortfall, and delays in the Robotaxi initiative. The semiconductor sector bore its share of the burden, with stalwarts like Nvidia witnessing a 6.2% slide, Broadcom Inc. (AVGO) shedding 7.6%, and Arm Holdings plc (ARM) succumbing to an 8.2% drop.
The market echoes of distress resounded not just across individual stocks but also reverberated through the Roundhill Magnificent Seven ETF (MAGS). This ETF, tracking the Magnificent Seven tech giants, plummeted by 5.8%, marking its gloomiest trading day in history. In a calamitous single session, these once-mighty tech behemoths collectively hemorrhaged nearly $700 billion in market valuation, with Nvidia Corp. (NVDA) alone witnessing an eye-watering loss of $180 billion.
The riddle that now haunts investors centers on whether the tech-driven bull market is staggering to its conclusion or if the purported AI bubble is on the brink of a cataclysmic burst. Revelations from veteran Wall Street oracle Ed Yardeni suggest that investors have been fleeing tech stocks since the onset of July 11, seeking solace in interest-rate-sensitive alternatives.
June’s CPI, lower than anticipated, was the unexpected catalyst that triggered a rush into interest-rate-driven equities. Yardeni’s assessment leans on the notion of a singular rate cut for 2024, underpinned by the tenacious resilience exhibited by the economy.
Amidst the tumult, Yardeni’s sage words suggest that the market, for now, is merely enduring a mild convulsion from the grips of an overbought state. Peering back to July 16, the S&P 500 stood a towering 15% above its 200-day moving average — a historical precursor to looming 10%-20% corrections or more ominous downturns during recessionary epochs.
Yet, contrary to the ghosts of recession lurching in the shadows, Yardeni posits that the current upheaval does not seem tethered to widespread recession dread. Admittedly, the Federal Reserve stands ready to enact a potential interest rate reduction come September, a silver lining amidst the gathering storm clouds.
Is this the onset of a new chapter, where tech stalwarts are no longer the unassailable juggernauts of yore, but fallible entities dancing to the tunes of market caprices? Only time will unveil whether this is a mere wobble or the prelude to a seismic shift reshaping the tech landscape as we know it.
Buckle up, dear investors, for the road ahead appears fraught with volatility as the tech titans navigate choppy waters in a bid to reclaim lost glory.
