Big tech stocks slumped again on Wall Street, pulling the Nasdaq down 10 per cent over the past three trading days.
The tech-heavy index dropped 4.1 per cent on Tuesday, far worse than other indexes such as the Dow Jones Industrial Average and the S&P 500, which were both down by about 2.5 per cent, while Toronto’s benchmark stock index lost 118 points, or just under one per cent, to close at 16,099. That’s about where the TSX was at the end of July.
Tech stocks have been on a tear through the pandemic on expectations that they can continue to deliver strong profit growth almost regardless of the economy and global health, but many market-watchers have been saying the eye-popping gains were overdone. Last week shares in Facebook, Apple, Amazon, Tesla and others started sliding, and they haven’t stopped since.
Critics have long been saying that big technology stocks had shot too high, despite being growing and profitable companies. Such so-called “growth” stocks have been trouncing the performance of stocks that look like better bargains — called “value stocks” by investors — by margins wide enough to raise eyebrows along Wall Street.
“The growth versus value outperformance was at an unheard of extreme at the end of August,” said Sam Stovall, chief investment strategist at CFRA.
That gap began to narrow on Thursday, when tech stocks began cracking and the Dow fell more than 800 points, and that “showed investors that tech stocks and growth stocks can fall just as easily as they rise,” Stovall said.
Tesla has been one of the brightest examples of Big Tech’s furious movements. It surged 74.1 per cent in August alone. But it slumped 21 per cent on Tuesday on disappointment that the company won’t apparently be joining the S&P 500 any time soon.
The company behind the S&P 500 announced on Friday the inclusion of several companies in the benchmark index, including Etsy. Some investors thought Tesla would be among them, which can create huge bouts of buying as index funds automatically fold the stock into their portfolios.
“When this didn’t happen a lot of the people who were speculating on this ran for the exits,” said Colin Cieszynski market strategist at SIA Wealth Management, in an interview with CBC News.
Tesla has now lost about a third of its value in the past week.
Technology wasn’t the only thing lower though. Energy stocks fell as the price of oil tumbled. TSX-listed Suncor Energy lost eight per cent to fall to $18.53 as the oil giant revealed it will produce far less oil this quarter because of a fire that damaged one of its refineries.
Among the few gainers was General Motors. The automaker rose eight per cent after it said it’s taking an ownership stake in electric-vehicle company Nikola. GM will also engineer and build Nikola’s Badger hydrogen fuel cell and electric pickup truck as part of the partnership.
Nikola surged 39.2 per cent, on track for its best day since it doubled on June 8.