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.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get spreads from just 0.1% on major global shares
  • Trade CFDs straight into order books with direct market access

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.


Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices 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.