Nasdaq ends wild day flat after Massive Tech reversed, Dow falling 470 factors for worst day since February

It was one of the wildest days of the year for the US stock market, with technology stocks as the battleground. Big Tech had a huge hit to start the day with concerns about rising inflation and high valuations. The sale eventually spread to the rest of the market later in the day.

But tech stocks rebounded in an odd twist that afternoon as investors returned to names like Amazon and Netflix, leaving the rest of the market in the red.

The tech-heavy Nasdaq Composite recently traded slightly higher after losing 2.2% at its session low. The Dow Jones Industrial Average is still down 460 points, led by declines in Home Depot and Boeing. The S&P 500 was down 0.9% as all 11 sectors traded in negative territory.

At the start of the volatile session, higher-priced technology stocks resulted in market losses, and the sale carried over to everything from banking stocks to energy to industrials. Now many tech stocks have made up most of the decline. Amazon and Netflix both rose more than 1%. The growth-oriented ARK Innovation ETF gained more than 2%.

The CBOE Volatility Index, a measure of fear in the markets derived from option prices on the S&P 500, rose to 23.73, a level not seen in two months. The so-called VIX stayed stubbornly above 20 for most of last year before dropping to a low below 16 last month. A rising VIX often goes hand in hand with falling markets.

Tesla stock, the flagship for high-valuation and high-expectations growth stocks, fell more than 1% but traded well from lows. A Reuters report that the electric car maker had suspended plans to expand its Shanghai plant into an export center also contributed to the decline.

Investors bought the decline in technology stocks amid the heavy sell-off this week. The group briefly fell out of favor earlier this year when fears of inflation and higher interest rates arose. Growth-oriented companies, which have been the pandemic’s biggest winners, tend to be hit hard by rising interest rates as they undermine the value of their future profits.

Some traders said short covering contributed to the intraday comeback in technology. When stocks sell high, short sellers betting against the names must buy back borrowed securities in order to close the short position and cash out.

Top investor Stanley Druckermiller voiced concerns about CNBC’s “Squawk Box” on Tuesday morning that unsettled investors.

While Druckermiller said he was still some long stocks, the hedge fund manager said the assets were “maddening” and that the Fed and the US government were risking the reserve status of the US dollar by they gave too many costly stimuli to an already hot economy.

“I can’t find a period in history when monetary and fiscal policy was inconsistent with economic circumstances, not one,” said Druckermiller. “If you want to do all of this and risk our reserve currency status, you run the risk of an asset bubble exploding. But I think we should at least have a conversation about it.”

Recent headlines, including a labor shortage and a surge in the consumer price index in March, contributed to inflation.

Job vacancies hit a record high in March when employers struggled to find workers for these positions, the Labor Department reported Tuesday.

Even as February Aid Wanted rose 597,000, or 8%, to 8.12 million, hires only rose 215,000, or 3.7%, to just over 6 million.

“If valuations stay high, even after taking into account sales yesterday and today, the promise of lows will wane as the market reports of strong job openings against labor availability and the need to raise wages to fill positions questions, not to mention fears that tax generosity is preventing workers from returning to work, “said Quincy Krosby, chief marketing strategist at Prudential Financial.

Big tech was overwhelmed on Monday as investors left stocks like Apple and Microsoft, pulling the Dow Jones Industrial Average and S&P 500 from record highs. Both stocks lost at least 2% at the start of the week. The Nasdaq was the worst hit, falling 2.5%. With that, he ended the day at his session low on Monday.

– With the support of Nate Rattner.

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