It’s been a hallmark of the tech bull run. If you want to play, be prepared for some awful days. That proved true again on Monday as the group’s highest flyers led the way down in the market’s worst day since April.
Bloodletting was rampant in the “Fang” bloc of Facebook, Amazon, Netflix and Google’s parent Alphabet. The quartet, whose gains through last week had outpaced the market by 14 times this year, tumbled 3.8%, wiping out more than US$70-billion in market value.
Darlings quickly turned to losers as tech stocks fell in proportion to their 2018 gains. That is: the better they performed, the faster they fell. Among Nasdaq 100 stocks, the top quarter ranked by year-to-date returns plunged 2.6% on Monday, compared to a decline of 1.4% in the worst.
It’s a danger that Wall Street strategists from Morgan Stanley to Bank of America have been warning about. Tech stocks led the market’s selloff in February and again in March. Yet before this week, investors had been unfazed.
More than $1-billion of fresh money has been added to exchanged-traded funds that focus on tech stocks this month, more than any other groups, according to data compiled by Bloomberg.
In the futures market, large speculators last week boosted their net positions in Nasdaq 100 minis contracts to the highest level since January, Commodity Futures Trading Commission data showed. — Reported by Lu Wang, (c) 2018 Bloomberg LP