The equity rout in technology shares worsened on Tuesday as investors rotated out of companies that led the market's historic comeback. The tech-heavy Nasdaq Composite underperformed once again after suffering its worst week since March. Chip stocks were among the biggest losers as tensions between U.S. and China continued to escalate. Here's what's happened:
Shares of Apple dropped 6.7% on Tuesday for the stock's third negative session in four. Apple has now dropped more than 14% since trading closed last Wednesday despite eking out a slight gain on Friday. That makes this Apple's worst three-day stretch since October 2008, according to Bespoke Investment Group. — Jesse Pound
Shares of Tesla fell 21.06% on Tuesday for the stock's single worst one-day performance on record. The drop came after S&P Dow Jones Indices decided against adding the electric vehicle company to the S&P 500. - Pippa Stevens
The market finished near its session lows on Tuesday, with the tech-heavy Nasdaq Composite dropping 4.1%. The Dow lost 633 points, or 2.3%, while the S&P 500 shed 2.8%. The Nasdaq has now lost roughly 10% in the last three trading sessions as major tech stocks give back some of their recent gains, bringing the index into correction territory. — Jesse Pound
An economic boom in 2021 that resembles the surge following World War II could be in store for the U.S. economy, according to Morgan Housel, the former columnist at The Wall Street Journal and current partner at venture capital firm The Collaborative Fund.
"One thing that I think is overlooked or underappreciated today, are the odds — and this is not my baseline forecast — but the odds that 2021 could actually be one of the best years for the economy in history, which sounds ridiculous given what we are dealing with right now," Housel said on "The Exchange."
Even so, Housel said the government stimulus in response to the coronavirus pandemic, combined with more good news on the vaccine for Covid-19 heading into next year, could help lay the groundwork for a strong economic rebound. "Put all those factors together and what 2021 could look like is something most analogous to the end of World War II," he said. - Kevin Stankiewicz
The major averages traded around their session lows with less than an hour left as tech shares continued to get battered around. The Dow was down more than 600 points, or 2.3%. The S&P 500 slid 2.8% and the Nasdaq Composite plunged 3.8%. —Fred Imbert
Michael Darda, chief economist and market strategist at MKM Partners, sees no problem with the current market drop, calling it a "largely healthy" rotation after a massive run-up in tech stocks. In a note to clients, he wrote the firm's "adjusted equity risk premium and price/liquidity models continue to show upside." However, he downgraded tech to neutral from overweight given the "rise in valuations this year." "The upside from here is likely to be clustered in the re-opening trades (industrial cyclicals and value)," said Darda. —Fred Imbert, Michael Bloom
The major averages lifted off their session lows with about two hours left in the trading day. The Dow Jones Industrial Average fell about 360 points, after dropping more than 600 points earlier in the session. The S&P dipped 1.7%, after falling 2.5% earlier. The technology-heavy Nasdaq Composite plunged 2.6%, after nearly reaching correction territory earlier on Tuesday. — Maggie Fitzgerald
Shares of space tourism venture Virgin Galactic rose as much as 12% in trading after CNBC reported on Sunday that the company plans to conduct its next test spaceflight on Oct. 22. The flight will be the first of the final two Virgin Galactic expects to complete before it flies founder Sir Richard Branson, a milestone that will mark the beginning of the company's commercial service. Additionally, UBS became the latest on Wall Street to give Virgin Galactic a buy rating, as the firm on Monday began coverage of the stock and said it sees more than 50% upside in the year ahead. UBS expects Virgin Galactic's annual sales of tickets for rides to the edge of space will be quadrupling within just a few years of the company beginning commercial services, with a compound annual growth rate of 300% through 2024.– Michael Sheetz
Read more midday movers here. —Maggie Fitzgerald
The major U.S. stock benchmarks were under pressure to start the week as last week's tech sell-off continued. The Dow was down 527 points, or 1.9%. The S&P 500 slid 2.2% and the Nasdaq Composite plunged 3%. Shares of Facebook, Amazon, Apple, Alphabet and Microsoft were all down sharply. Netflix was the relative outperformer, but was still down 0.8%. —Fred Imbert
Oil slid to its lowest level since June on Tuesday as demand fears pressured prices. West Texas Intermediate crude, the U.S. oil benchmark, shed $3.51, or 8.8%, to trade at $36.26 per barrel. International benchmark Brent crude traded 6.24% lower at $39.39.
"Today's oil price move is a clear sign that the market now seriously worries about the future of oil demand," said Paola Rodriguez-Masiu, senior oil markets analyst at Rystad Energy. - Pippa Stevens
Andrew Thrasher, founder of Thrasher Analytics, noted the Nasdaq 100 index developed last week a "bearish engulfing candle," a move that could signal further declines for the tech-heavy benchmark. The candle was developed after last week's high and low exceeded those of the previous week. The index also posted a weekly loss last week.
This "signifies a great deal of unrest within the price action, seeing an expansion in price volatility with a higher-high and lower-low all in a single week," Thrasher said in a note to clients. "This is not an overly uncommon candle pattern, but it's unique to see it happen while at a 52-week high."
Thrasher highlighted the last time such a move happened was in the fourth quarter of 2018, just before stocks sold off into year-end. —Fred Imbert
"I implore the people who are newbies, do you know what you own? Do you know why you own it? Do you own it just for momentum? If that's it, sell," Cramer said on "Squawk Box." "These people who are just in there because they think stocks only go up, they are the ones who are going to get hurt."
Cramer recalled the bursting of the dot-com bubble roughly two decades ago, saying investors who made massive gains on paper lost them when the market sold off steeply.
"We didn't scream 'sell' enough in 2000. We can't do that now," Cramer said. "You should've sold then and therefore, maybe you should have sold now." - Stankiewicz
Pro Subscribers can read more here. - Michael Bloom
The swift reversal in the technology sector is pushing the Nasdaq Composite close to correction territory, or a 10% drop from a record high. Based on Wednesday's record Nasdaq Composite close of 12,056.44, correction level (10% drop) would occur at 10,850.80. Session low at the moment is 10,875.17.
On Tuesday, the Nasdaq also fell below its 50-day moving average level of 10,882.36 for first time since April 21 on an intraday and a closing basis. — Yun Li, Peter Schacknow
Semiconductor stocks were among Tuesday's biggest losers after the U.S. Department of Defense floated the idea of blacklisting China’s largest chipmaker SMIC. A Defense Department spokesperson said Saturday the U.S. is in discussions over whether SMIC should be added to the Commerce Department's entity list. Imposing export controls on SMIC would impact U.S. companies that sell chip-making technology to China manufacturers. Officials also recently announced it will further tighten restrictions on Huawei Technologies in order to crack down on the telecommunication company's access to commercially available chips.
The VanEck Vectors Semiconductor ETF (SMH) fell 4% in morning trading on Tuesday. Applied Materials, LAM Research, KLA and ON Semiconductor all tumbled at least 7%, while Nvidia and ASML both dropped more than 6%. — Yun Li
The sell-off in technology shares deepened on Tuesday as investors continued to dump high-flying names. The Nasdaq Composite fell 3.6% at the open after suffering its worst week since March. The Dow slid about 350 points, while the S&P 500 lost 2%. The biggest laggards in the Nasdaq on Tuesday morning include Tesla, Moderna, KLA, Nvidia and Apple. — Yun Li
Shares of Nvidia, Applied Materials and Lam Research — along with Apple and Tesla — were among the biggest Nasdaq 100 decliners heading into the 9:30 a.m. ET open. Nvidia and Apple slid more than 5% and Applied Materials was down over 6%.
Tesla was the biggest laggard in the index during premarket trading, plunging more than 14%. Other laggards included, Moderna, KLA Corp, DocuSign and PayPal.
Stocks were poised to open in negative territory on Tuesday after the Nasdaq Composite posed its worst week since March, while the Dow and S&P 500 registered their worst weekly performance since June. Amid the sell-off, CNBC's Jim Cramer said investors should take profits.
"High-fliers sell some--please please please," he said Tuesday in a tweet.
"As i said last week - there must be selling by those on margin [There] must be selling if you don't know what you own. If you are a paper millionaire sell sell sell .. buy back lower ... but take something off the table.. S&P is good!" he added. — Pippa Stevens
Japan's SoftBank was the buyer of billions of dollars in technology company options in the past month, the Financial Times said last week. SoftBank was reportedly the "Nasdaq whale," driving up volumes and contributing to a trading frenzy in highly flying technology names in the past few weeks, the report said. Technology stocks are selling off on Tuesday, continuing a tumble from last week which analysts believe is derived from worries that the massive tech run-up pushed valuations to unsustainable levels. SoftBank, through its $100 billion Vision Fund, has made big investments on privately held technology start ups. The big investments in the options market is new territory for the investment firm.— Maggie Fitzgerald
Disney's stock ticked up nearly 1% on Tuesday following an upgrade to buy from hold from Deutsche Bank. The Wall Street firm said Disney is "succeeding in the land grade phase of Direct-To-Consumer" with its streaming service Disney+. Disney "has the most clear path to successfully transitioning its general entertainment programming and content production businesses into a globally scaled, vertically integrated streaming entertainment leader," Deutsche Bank research analyst Bryan Kraft told clients. Deutsche also hiked its 12-month price target to $163 per share from $128 per share, implying a 20% rally from the stock's current level. — Maggie Fitzgerald
Shares of Nikola soared nearly 30% in premarket trading on Tuesday after General Motors said that it's taking an 11% stake in the electric truck maker. General Motors also said it will produce its marquee hydrogen fuel cell electric pickup truck the Badger by the end of 2022. GM is getting a $2 billion stake in Nikola and the right to nominate one board member in exchange for in-kind services. Shares of General Motors rose nearly 6% before the opening bell. Nikola founder and Executive Chairman Trevor Milton said the partnership gives Nikola access to GM's validated parts as well as its Ultium battery technology and a multibillion dollar fuel cell program. Nikola began trading June 4 after a reverse merger with VectoIQ, which is a publicly-traded special purpose acquisition company. The stock has rallied nearly 250% since its IPO. — Maggie Fitzgerald
The tech sell-off picked up again on Tuesday morning, with Nasdaq 100 futures dropping 2%. The dip comes on the heels of a 1.3% loss for the Nasdaq Composite on Friday and a nearly 5% decline on Thursday. The largest tech stocks also struggled in premarket trading. Shares of Apple fell 4.6%, while Amazon slid 3.9% and Microsoft lost 3.3%. — Jesse Pound
Shares of Tesla dropped more than 13% in premarket trading on Tuesday after the electric vehicle company was not added to the S&P 500 index. Many investors expected the company to be added to the benchmark on Friday when S&P Dow Jones Indices announced the quarterly rebalance. Shares of Tesla are still up more than 300% this year. - Pippa Stevens
The tech sector suffered last its biggest one-day decline in more than five months, raising questions about the health of the market's best-performing stocks moving forward. But Mark Haefele, chief investment officer at UBS Global Wealth Management, thinks this is just a correction after a massive run-up in the sector. "The sector is expensive, but not in a bubble," Haefele wrote in a note. "The US tech sector has climbed to its highest post-dotcom valuations ... But, using the tech-heavy Nasdaq composite as a proxy, valuations are still well below levels seen at the height of the dotcom bubble of the late 1990s levels, when the index forward P/E rose above 70x." Haefele added that a correction "need not signal the end of the rally." —Fred Imbert, Michael Bloom
U.S. stock futures were under pressure on Tuesday morning as tech — the best-performing market sector year to date — was headed for another big drop. Dow Jones Industrial Average futures were down 34 points, or 0.1%. S&P 500 futures slid 0.8% and Nasdaq 100 futures dropped 2.5%. Shares of Facebook, Amazon, Netflix, Google-parent Alphabet and Microsoft all traded more than 3% lower in the premarket. Apple shares were down 4.4%. Those tech losses came after the sector suffered last week its worst sell-off in more than five months. —Fred Imbert