On Thursday, Wall Street stock indices collapsed, although the decreases seem to be slight compared to previous increases. The sell-off mainly affected companies from the technology sector, which had previously gained most.
Nvidia or Tesla lost yesterday about 9%, and Apple 8% Microsoft decreased by 6%. The whole Nasdaq index went back by almost 600 points, or 5%, which was the biggest decrease since March. However, let us remind you that since the March bottom, the Nasdaq index has increased by as much as 90%. So the current correction is symbolic for now. Companies from the technology sector could go through a wave of profit-taking and a little panic. It is worth recalling that recently the shares of Tesla or Apple have become more expensive only because of the split. Valuations have increased, although the fundamental situation of companies has not changed at all. This only shows the scale of participation of speculative capital in such shares. When it rises, we buy it further, because it rises, when it starts to fall, we sell, because it falls, and so on.
The American stock market needs to cool down a bit from the influence of typical speculators, including individual investors who have almost thrown themselves at Nasdaq companies in recent times, rising stock prices and leading to the appearance of valuations somewhat detached from reality. The trend is not contested by anyone, but it is unhealthy for the market if something grows too fast in too short a time, as such a move seems unsustainable in the long run.
To sum up yesterday's session, Dow Jones fell by over 800 points or 2.8%, losing the most since June, and S&P 500 went back 126 points or 3.5%, which was also the biggest fall since June. Sentiment in Asia was not improved by the news that fears of renewed Sino-American tensions increased after Chinese PM Xi Jin Ping said that Beijing would never accept foreign interference.
Meanwhile, in Australia, the ASX 200 index fell by almost 3% when Canberra said it would extend international border restrictions for at least another three months to protect Australia from the re-emergence of COVID-19. Stock prices also fell in Hong Kong, China and South Korea. Contracts in the US also point to a possible opening up in the downside.
Today, the key data from the US labour market will be published at 2:30 p.m. It may depend, among other things, on whether the correction on Wall Street will be continued or whether it was just a one-day market shake and the trend from next week will return, although perhaps not as strong as before.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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