— This is the script of CNBC's news report for China's CCTV on September 4, 2020, Friday.
Overnight in U.S. trading, we saw heavy losses in the tech sector. Among major technology companies, Apple suffered the steepest decline, falling 8 percent, followed by Microsoft, which fell more than 6 percent, and Amazon, Netflix and its Google's parent company, all of which fell about 5 percent. The broader technology sector of the S&P 500 ended down 5.83%, its biggest one-day drop since March. The tech-heavy Nasdaq Composite index closed down nearly 5%.
The Nasdaq and the S&P 500 had just hit record highs in the previous session, and the market had been expecting a pullback, but the magnitude of the decline surprised many. According to the analysis, this is caused by several reasons.
First, since the bottom in March, U.S. stocks, especially technology stocks, continue to rise, some people think that technology stocks are overbought, there is a bubble.
And when the bulk of the gains are concentrated in very few sectors, or even a few top stocks, the declines can be particularly sharp. What's more, much of the rally has been driven by retail investors, so if stocks fall enough, it could lead to an unwinding of their positions, leading to a sharp sell-off.
Some believe it was because different sectors take turn to increase or decline. We did see some big gains in overnight trading in traditional stocks like Macy's and Carnival Cruises that benefited from the economic restart.
But all S&P 500 sectors ended down. Analysts tell us that better economic data may be needed to support this situation. In the most recent data released that day, jobless claims did beat market expectations, but partly because of a change in the way they were counted. Overall employment in the United States remains at historically low levels. The U.S. trade deficit in July was the largest since July 2008, and that could drag down economic performance in the third quarter. Markets are worried about a long and difficult economic recovery.
So, is this fall a buying opportunity or the beginning of a bigger fall？
Charles Schwab, chief investment strategist
I'm not sure that just today's weakness is sufficient enough to ease some of those excesses and tell the short-term folks this is the kind of dip you want to buy. I don't have a clear crystal ball more than anybody else, but certainly the excess suggests something more than a single-day compression in the high-flyers may be necessary to kind of right the ship
True, it may still be hard to tell what's next from a single day's performance, and the market's voice is now very divided. Some think this is a very normal correction, no need to be over-worried, but chief economic advisor at Allianz warns that we may see a greater drop soon, next few days, we will see who the good investors are.
Mohamed El-Erian, chief economic advisor at Allianz
So, are you fundamentally based? Or are you completely liquidity based, relying on the central bank and therefore going to buy the dip? That is the tug of war that's going to play out and it's going to show the DNA of investors. My own gut feeling is that the liquidity condition is still strong. And if it's not, then this market comes down a lot more. We could have another 10% fall easily if I want to stress if people start thinking fundamental
We'll also be watching closely to see what happens next