U.S. Stocks Sink to 4-Week Low, Tech Rout Spreads: Markets Wrap

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09 Sep 2020, 04:16 AM IST

U.S. Stocks Sink to 4-Week Low, Tech Rout Spreads: Markets Wrap

Traders work on the floor of the New York Stock Exchange. (Photographer: Michael Nagle/Bloomberg)

(Bloomberg) -- U.S. stocks sank for a third day, with selloff in technology shares picking up steam as investors fled the high flyers who fueled a historic five-month rally. Oil plunged, while Treasuries rose with the dollar.

Volatility roiled financial markets, sending the Nasdaq 100 down 4.8% and leaving it 11% off its record set last Wednesday. Tesla suffered the worst rout in its history and is now down 34% in September. Apple’s 6.9% plunge wiped out almost $140 billion in market value Tuesday, while its three-day slide swelled to 14%, the most since October 2008.

Investors have been spooked by the last leg of a rally that drove valuations to levels last seen in the dot-com era. Few pockets of the market were spared, with 450 S&P 500 members lower and only five Nasdaq 100 components higher. The broader index hit the lowest since Aug. 11. West Texas Intermediate crude plunged almost 8% in New York.

The speculative fever that drove huge bullish bets in options markets and saw shares in bankrupt companies surge has broken in September, wiping out trillions in market value. The hardest hit sectors remain sharply higher for the year, stoking a debate among strategists over whether the latest pullback is a sign of market health or the start of a larger drawdown that has further to go.

“Some froth has come off the market which is a good thing, but keep in mind that we still remain well over levels that could be considered ‘fair value’ in stocks,” Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter, wrote in a note. “And while the outlook for stocks remains generally constructive long term, there’s a lot more downside in this market if we get any major disappointments.”

For now, traders sought the safety of haven assets, pushing Treasury yields lower and strengthening the dollar. Gold declined.

The U.S. and China relationship is also back in focus after President Donald Trump said he plans to end America’s reliance on the country. Trump also threatened to punish any American companies that create jobs overseas, and to forbid those that do business in China from winning federal contracts.

Trump Vows to Sharply Scale Back U.S. Economic Ties With China

“The path of least resistance for the market may well be to test the downside,” said Peter Chatwell, head of multi-asset strategy at Mizuho International Plc. “Ultimately, if there is more selloff, I suspect real money investors will take the opportunity to buy the dip.”

Here are some key events coming up:

The ECB will probably hold rates on Thursday but indicate that downside risks have intensified, suggesting further easing is possible before year-end.
U.S. CPI data is due Friday, with consumer prices expected to rise in August for a third straight month.

These are the main moves in markets:

Stocks

The S&P 500 Index dipped 2.8% to 3,331 as of 4 p.m. New York time, the lowest in four weeks.

The Dow Jones Industrial Average decreased 2.3%.

The Nasdaq Composite Index declined 4.1%, the lowest in four weeks.

The Nasdaq 100 Index fell 4.8%.

Currencies

The Bloomberg Dollar Spot Index gained 0.5% to the highest in more than two weeks.

The euro dipped 0.3% to $1.1778, reaching the weakest in four weeks on its sixth consecutive decline.

The Japanese yen appreciated 0.2% to 106.07 per dollar, the strongest in a week on the largest gain in more than a week.

Bonds

The yield on two-year Treasuries dipped less than one basis point to 0.14%.

The yield on 10-year Treasuries dipped four basis points to 0.68%, the largest decrease in five weeks.

The yield on 30-year Treasuries dipped five basis points to 1.42%, the biggest dip in almost seven weeks.

Commodities

West Texas Intermediate crude sank 7.3% to $36.89 a barrel, the lowest in 14 weeks on the largest tumble in 20 weeks.

Gold strengthened 0.1% to $1,936.42 an ounce.

Copper dipped 1.3% to $3.02 a pound.