Tech Recovery Proved Fragile With Index Down Again For Year

(Bloomberg) -- It’s been a rough ride for tech stocks this year.

In as little as two weeks, the Nasdaq 100 Index has erased its 2021 gains twice. The benchmark plummeted 3.1% Thursday, wiping out its rally for a second time as inflation concerns rattled investors, fueling a selloff in bonds and pummeling U.S. growth stocks. The index posted its worth month since March 8 relative to the S&P 500 Index, which fell 1.5%.

Earlier this month, the Nasdaq 100 fell as much as 11% from its February record high, shedding more than $1.7 trillion in value as a rally in Treasury yields spooked the stock market. Investors have warned that growth stocks would be among the hardest hit amid a rotation into value as the economy reopens and vaccinations ramp up.

The drop in the index was widespread. Just three companies finished up during the day’s trading, while 99 fell for a negative 96 spread between advancers and decliners. That’s the second largest gap in the negative direction on the year and only the second time it has exceeded negative 95.

“This selloff in tech is unpleasant, but it’s not near the levels where it’s worrisome,” said Matt Maley, chief market strategist at Miller Tabak + Co. “Valuations are pretty rich and the sector has had a good run since last March, so the selloff can take some of the froth off the sector. Longer-term, there is some room for a further advance.”

The selloff accelerated after the Nasdaq 100 failed for a second time during the session to surpass a level that some chartists watch to determine whether the benchmark will be able to fully recover from its latest rout. It’s the mid-level of the February-March decline, or 13,044. The gauge came within four points of that threshold right after the open and attempted again around noon, to no avail. According to Fibonacci analysis, a system pioneered by 13th-century mathematician Leonardo of Pisa, stocks have a better chance of making a full recovery after recouping 50% of a retreat.

The Nasdaq 100 Index climbed 48% last year as high-flying tech stocks emerged as pandemic winners amid low interest rates and lockdowns that forced consumers to embrace online shopping and a broader shift to the digital world. Come 2021, the sentiment on tech is dwindling as rising yields make high-growth stocks less desirable. A turnaround in economic data adds to optimism a new business cycle is in the early innings. That environment has favored cheaper value companies in the past.

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