Stock market bloodbath: Dow and Nasdaq take the plunge

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Stocks wiped out all of their gains after a huge bout of exuberance on Wednesday when the market hit another record high. The Nasdaq climbed above 12,000 points for the first time in history on Wednesday.

Well for one, the Nasdaq outperformed the other two major stock indexes – the Dow (UNDUE) and the S&P 500 (SPX) – for months, investors could therefore simply make a few adjustments after Wednesday’s records. The Nasdaq remains up nearly 30% in 2020, far surpassing its counterparts.

The Dow Jones fell 2.6% mid-morning, while the S&P was down 3.4%.

But there are also technical reasons for Thursday’s decline: As U.S.-China relations deteriorate, investors are moving money out of tech, which could be hit hardest by a potential tariff hike.

“The Nasdaq is hit hard by the continued spin to cyclicals and big tech expectations will eventually pay the cost of further deterioration in US-China relations,” said Ed Moya, senior market analyst at Oanda .

Equities in cyclical sectors are also expected to perform better as the economy recovers.

Big Tech companies such as Amazone (AMZN), Google (GOOGL) and Microsoft (MSFT), which are all part of the Nasdaq, became the summer’s safe haven investment. But investors are starting to wonder when the rally will run out of steam, either because of increased regulation or because the economy as a whole is recovering enough to completely nullify the need for security choices.

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