A steep selloff in high-flying technology stocks sent the S&P 500 Index to its worst day since December 2022, ending its best stretch without a 2% decline since the start of the global financial crisis in 2007.
The US equities benchmark slid 2.3% on Wednesday, ending 356 sessions through Tuesday without a drop of at least 2% — its longest streak in 17 years, according to data compiled by Bloomberg. This comes after the index rose as much as 15% above its 200-day moving average last week — a crucial level that has historically foretold past selloffs.
“All good things must come to an end — but this isn’t the end of the world for the US stock market,” said Jay Woods, chief global strategist at Freedom Capital Markets. “The rotation trade into small caps and value is still on, with volatility picking up as weak seasonal factors come into play ahead of US election season.”
Wednesday’s losses came as Tesla Inc. shares fell 12% in the biggest drop since September 2020 after falling short of second-quarter profit estimates. Google parent Alphabet Inc. also saw weakness in its YouTube advertising revenue, knocking the Nasdaq 100 Index about 3.7% lower for its worst day since October 2022. That pushed the S&P 500 4.2% below its all-time closing high.
With Wall Street projecting that the tech behemoths’ profit growth is poised to slow, that means it will be key to see whether the dip-buyers come back again as more Big Tech companies unveil results in the coming weeks. Investors will continue to get a fresh look at Corporate America’s profit engine, with Apple Inc., Microsoft Corp., Amazon.com Inc. and Meta Platforms Inc. all set to report next week.
That said, declines in other corners of the market outside of Big Tech like small caps were not as severe as traders grow more confident about interest-rate cuts by the Federal Reserve in the near future.
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The S&P 500 had been on a torrid rally that’s pushed it above 5,600, notching 38 all-time closing records this year — among its best stretches of records at this point in the year this century, behind 2021, according to data compiled by Bloomberg. The index’s current bull run has added $17 trillion in market value since it touched its nadir in October 2022.
Of course, equities have been locked in a tight range of late, with the S&P 500 spending only 25 out of 141 trading sessions in 2024 moving at least 1% in either direction, data compiled by Bloomberg show. Now investors are heading into what’s historically been the worst stretch of the year for stocks in August and September.
“This is more about a heavyweight tech unwind that’s influencing the benchmarks,” said Todd Sohn, managing director of ETF and technical strategy at Strategas Securities. “It’s painful, but good for the overall market beyond growth stocks since non-tech stocks are still hanging in there.”
