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The stock market crashed?No, but the rotation away from US technology stocks is shaking up some investors



On the contrary, social media believes that the stock market is still far away from the “collapse” field because anyone has fresh memories of the sell-off triggered by the pandemic last March, let alone the 2008 global financial crisis and the 2000 Internet bubble Shattered, or October 1987, I remembered.

However, the recent market leadership rotation does seem to be happening, and the turbulent move may make some investors feel uneasy.

This can help explain why the term #stockmarketcrash was popular on Twitter on Thursday, even though the Dow Jones Industrial Average, the Dow Jones Industrial Average,
-1

.11%
And S&P 500 SPX,
-1.34%
It has not even entered the so-called market correction, which is a 10% fall from the recent high.

Federal Financial Network Chief Investment Officer Brad McMillan (Brad McMillan) told MarketWatch in a telephone interview that the question investors should ask before ringing the alarm is whether the price trend is unexpected or unusual.

Macmillan said that, given that the rise in bond yields seems to largely reflect increasingly optimistic economic expectations, the rise in bond yields seems to be the main culprit, so the answer is no.

Although the high-tech components of the Nasdaq Composite Index,
-2.12%
At that time, I was entangled with the Dow Jones Industrial Average (DJIA),
-1.11%,
The indicator generally followed by the US market is less than 4% lower than the historical high set last month. The S&P 500 Index is a large benchmark in the United States, which has fallen less than 5% from recent records.

The market weakness on Thursday echoed last week’s volatility. Both sell-offs were triggered by a sell-off in the Treasury bond market, which pushed up yields. The yield of the 10-year U.S. Treasury bill TMUBMUSD10Y,
1.543%,
It soared last week to 1.6%, a high in more than a year, and rose back to more than 1.5% on Thursday. Fed Chairman Jerome Powell’s remarks did not seem to quell concerns that although potential inflation may overheat the U.S. economy, it may see the central bank begin to cut monetary stimulus measures earlier than expected.

The Nasdaq index fell more than 2% that day, while the Dow fell more than 700 points at its intraday low, but it was still near 430 points, or 1.4% on Thursday, while the Standard & Poor’s 500 index fell 1.5%. Those are dropping sharply every day, but not extraordinary.

McMillan pointed out that it is not uncommon for stocks to start to fall as yields begin to rise. It is also surprising that high-growth stocks have stretched their valuations during the post-pandemic rebound, bearing the brunt of selling pressure.

Investors seem to profit from these high-income earners and use the proceeds to buy company stocks in sectors that are more sensitive to economic cycles. The excessive weighting of technology indexes and technology-related stocks in major indexes may make them vulnerable to weakness.

The price trend of large technology stocks and discretionary stocks-Apple Inc. AAPL,
-1.68%,
Microsoft Corp. MSFT,
-0.65%,
Amazon.com Inc. AMZN,
-0.66%,
Facebook Inc. FB,
+ 1.11%,
Alphabet Inc. GOOG, Google’s parent company,
+ 1.05%

GOOGL,
+ 1.22%,
Tesla’s TSLA,
-5.24%
And Nvidia Corp. NVDA,
-3.52%
— Mark Arbeter, president and technical analyst of Arbeter Investments, pointed out that it currently accounts for 24% of the S&P 500 Index.

The weakness of large technology stocks has been suppressing the broader average, causing concerns about market peaks and the end of the cycle. From our perspective, the breadth is still very strong, which is a feature that is not usually available in the market,” Renaissance Macro Research analyst Kevin Dempter said in a report on Thursday.

related: The most sensitive industry in the stock market says the cycle is far from turning

He said that compared with large discretionary stocks, small discretionary stocks are at an absolute high and also at a multi-year high, which shows signs of widespread participation. The trends in industries such as energy and banking are also strong. They are often winners in a high-yield environment, and groups that are more sensitive to the economy, such as transportation and services, also benefit from it.

“Rather than the market peak, we believe that this is essentially a rotation, with limited downside space, and looking to the future, we hope to become a winner in increasing holdings of high-yield bonds such as banks and energy, because these groups may show greater performance in the future. Performance,” Dempter wrote.

What about that crash? The Dow Jones Index continues to maintain its 2021 gains and is 5% below the historical high set last month, which means that the most popular stock market indicator has not even entered the correction zone and is usually defined as a decline. It is 10% higher than the most recent peak. And it is far from a bear market, which is defined as a 20% fall back.

Not all bear markets are the product of collapse-a more obscure term, but it means a sudden and sharp decline. Some analysts define a crash as a drop of 5% or more in a day. Others believe that the typical collapse is a sudden, sharp drop, causing the market to enter a bear market in just a few trading days, or even exceed the bear market.

This was the case last year, because it was clear that the COVID-19 pandemic will almost stagnate the U.S. and global economy. The S&P 500 index plummeted from its closing price set on February 19, dropping about 34%, and then bottomed on March 23.

Since the March low, the S&P 500 index is still up 71.2%, and the Nasdaq index is up 68.9%. Even with the recent correction, Nasdaq still rose by more than 90% during that period.


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