Big Tech-Concentrated S&P Falls Most In 2 Months On Covid Cases Going Parabolic, No Stimulus
Fears of rising coronavirus cases, lockdowns threatening the economy and no new government stimulus expected before the Nov. 3 election helped push down the S&P 500 Index for the third day this week.
Technology stocks were among the worst performers as the S&P fell about 7 percent this week, approaching its biggest drop in almost two months.
“It’s not a great day for tech stocks and the sort of bullish public-market valuations that late-stage startups are using as private-market valuation comps,” Alex Wilhelm wrote for Techcrunch, where a headline read, “Tech stocks sell off sharply as market looks at covid-19 numbers, whispers ‘oh f***’”.
The S&P 500 fell 3.53 percent on Wednesday, with about 95 percent of stocks lower in widespread selling. The tech-heavy Nasdaq Composite fell 3.43 percent. Intel and Netflix reported weak earnings and SAP also is down.
“But perhaps most importantly for startups and startup founders, the SaaS-heavy Bessemer cloud index is off an even sharper 3.80 percent,” Techcrunch reported.
Microsoft Corp. stock was down 4.1 percent after a disappointing forecast. Bitcoin headed to its biggest drop in a month, Bloomberg reported.
In Silicon Valley, shares of Twitter, Facebook, and Alphabet fell as much as 6 percent, 5 percent, and 5 percent in Wednesday trading, San Francisco CBS local reported.
One tech exception was New Jersey-based Automatic Data Processing, whose stocks rose 7.4 percent after its profit report exceeded expectations.
Covid-19 cases are exploding around the U.S. — especially in the Midwest — and the world. France imposed a new nationwide lockdown and German Chancellor Angela Merkel reached a deal for a one-month partial lockdown.
“The measures may not be as stringent as the shutdown orders that swept the world early this year, but the worry is they could still hit the already weakened global economy,” CBS reported.
European policymakers “must choose between low unemployment or low covid transmission rates. Unfortunately, they are now left dealing with the most sensitive currency of them all — people’s lives,” Stephen Innes of Axi said in a report.
Analysts warn of increased volatility ahead of the presidential election and in its aftermath, where a contested outcome is making investors nervous, Bloomberg reported.
The VIX Index, which measures how much volatility investors expect from the S&P 500, climbed 18.3 percent to more than 40 on Wednesday.
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Also known as the “Fear Gauge” or “Fear Index,” VIX values are used by investors, research analysts and portfolio managers to measure market risk, fear and stress before they make investment decisions.
When stock markets plunged in March due to the pandemic, the VIX shot up to a level of nearly 83 after years of remaining mainly well below 30.
A tightening presidential race “has markets somewhat unnerved that the prospects of a contested election are back in the mix,” said Jamie Cox, managing partner for Harris Financial Group. “Aid is coming regardless. There’ll be no political motivation to hold it back after the election. There’s plenty of desire to get money out to people so I think it will happen one way or another in November.”