CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure. CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure.

Plunge in US tech continues, as NASDAQ enters technical correction

The mini tech-wreck on Wall Street continued overnight. Heading into last night’s trade, the question on everyone’s lips was whether last week’s pullback in US tech-stocks would extend into the new week. After the US labour-day long weekend, the answer was an emphatic: yes.

The NASDAQ plunged 4.1%, with the benchmark S&P 500 falling by 2.8%. Of course, the big laggards were those stocks that had launched the US stock market into record territory to begin with: Apple shed another 6.7%, while Tesla shares flopped a remarkable 21%.

Although the correction in US-tech is the catalyst and primary drag on global stocks right now, one is struck by the very clear risk aversion extending throughout financial markets. Volumes were high and the losses were broad-based in equity markets, while the US VIX edged back to the 31-mark.

Despite the bearish price signals being sent by the market overnight, the general tone to market commentary has remained relatively neutral. Panic can’t be read anywhere in the financial press. This move, as the consensus seems to be in the market, remains a necessary function of an until-now frothy market.

Given the market’s buy-the-sip conditioning, engineered by a paternalistic US Fed, the view is probably reasonable. However, given how distorted markets had ostensibly become, there’s room for a long-way down for US stocks.

For arguments sake: the forward P/E for the S&P500 remains at a 35% premium to its 5-year average, while its ever reliable 200-day EMA sits another 6% below the index’s current price.

Of course, the yield advantage still sides with stocks, and once momentum neutralizes, the path of least resistance for equities probably remains to the upside.

Nevertheless, this spurt in volatility ought to shake-down the market, and probably sow some nervousness into it, especially as markets look towards a risk-laden couple of months.

This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

Act on share opportunities today

Go long or short on thousands of international stocks with CFDs.

  • Get full exposure for a comparatively small deposit
  • Trade on spreads from just 0.1%
  • Get greater order book visibility with direct market access

See opportunity on a stock?

Try a risk-free trade in your demo account, and see whether you’re on to something.

  • Log in to your demo
  • Try a risk-free trade
  • See whether your hunch pays off

See opportunity on a stock?

Don’t miss your chance – upgrade to a live account to take advantage.

  • Trade a huge range of popular stocks
  • Analyse and deal seamlessly on fast, intuitive charts
  • See and react to breaking news in-platform

See opportunity on a stock?

Don’t miss your chance. Log in to take advantage while conditions prevail.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Friday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.