Morgan Stanley’s Top Equity Strategist: Popular Tech Stocks Are Headed Down, Nasdaq To 200 Moving Average

Morgan Stanley’s Top Equity Strategist: Popular Tech Stocks Are Headed Down, Nasdaq To 200 Moving Average

tech stocks
Trader Thomas Lee works on the floor of the New York Stock Exchange, Feb. 28, 2020. (AP Photo/Richard Drew)

The sell-off and rapid decline in technology stocks over the past month is probably not over, Mike Wilson, Morgan Stanley’s chief U.S. equity strategist, said in a client note on Sunday.

Since its Feb. 16 peak, the Nasdaq 100 fell more than 10 percent despite good news about fewer covid-19 cases, scaled-up vaccinations, and the imminent $1.9 trillion stimulus package.

On Tuesday, tech stocks rallied, helping the Nasdaq Composite rebound by 3.2 percent just a day after sliding into correction territory.

With interest rates rising and a full economic reopening anticipated, investors are moving from high-growth tech stocks towards value and cyclical stocks that will benefit from pent-up consumer spending outside the home, Wilson said, according to Business Insider.

Tech shares looked like they were moving towards recovery Tuesday as bond yields stabilized and investors bought the dip. Investors saw a rise in bond yields, which move inversely to prices, over the past few weeks. As rates jumped, tech shares traded lower, CNBC reported.

Investors appeared to grab the most beat-down stocks, pushing up shares of Tesla, which led the S&P 500, by 11 percent, cutting its loss over the past month to 26 percent. All 11 S&P sectors were up in recent trading.

PayPal and Nvidia each rose 6 percent. “The buy-the-dip mentality had been largely absent during a broader rotation out of growth stocks and into shares of companies better positioned to benefit from an economic upswing,” the Wall Street Journal reported.

Meme stock GameStop saw shares gain 18 percent.

These moves sent the Dow—which is weighted more heavily toward cyclical sectors—to score its second-highest close ever on Monday.

Listen to GHOGH with Jamarlin Martin | Episode 73: Jamarlin Martin Jamarlin makes the case for why this is a multi-factor rebellion vs. just protests about George Floyd. He discusses the Democratic Party’s sneaky relationship with the police in cities and states under Dem control, and why Joe Biden is a cop and the Steve Jobs of mass incarceration.

CNBC compiled a list of some of the tech company stocks that declined more than 20 percent this year as of this morning:

  • C3.ai, down more than 39 percent for the year, up 2.5 percent in the premarket.
  • Video game software developer Unity, down 37 percent for the year, up about 4.4 percent in the premarket.
  • Snowflake, down 21 for the year, up 3.7 percent in the premarket.
  • Software company Splunk, down 21 percent for this year, up 2.6 percent in the premarket.

The Nasdaq 100 should test its 200-day moving average, Morgan Stanley strategist Wilson said in his note on Sunday. “Based on the technical damage to date, the Nasdaq 100 appears to have completed a head-and-shoulders top and should test its 200-day moving average,” Wilson said.