The recent fluctuations in US technology stocks have drawn market attention, with the "Big Seven" tech companies losing $233 billion in market value on Tuesday, exacerbating the downtrend in US stocks. This situation has sounded an alarm for investors, but analysts generally believe it's not panic selling but a normal correction in a bull market.
At the close on Tuesday, popular tech stocks including Apple (AAPL), Amazon (AMZN), Microsoft (MSFT), Google's parent company Alphabet (GOOGL), Meta (META), and Tesla (TSLA) were generally down, with only Nvidia (NVDA) bucking the trend by rising. This fluctuation is considered a normal market move following a series of recent record highs.
According to Dow Jones Market Data, the single-day reduction in the market value of the Big Seven tech companies is the third largest this year, reigniting discussions about whether tech stocks are in a bubble.
Michael Sansoterra, the Chief Investment Officer at Silvant Capital Management, stated, "This is not panic selling. With the stock market recently setting a series of records, it's not surprising that some stocks that were slightly ahead of the market are correcting." He believes this is just a normal trend within this year's strong bull market.
The Dow Jones Industrial Average closed down 404 points or 1% on Tuesday, the S&P 500 fell about 1%, and the Nasdaq Composite dropped 1.7%. This volatility indicates the market is undergoing adjustments, but investors remain optimistic about the future.
Federal Reserve Chair Jerome Powell has testified in Congress for consecutive days recently, with investors eagerly awaiting more plans from the Fed to pivot towards rate cuts. While Fed officials have stated they are not in a rush to adjust the rate hike policy early or aggressively, the market is still closely monitoring changes in inflation and employment data.
The non-farm payroll report for February is due this Friday, and even if the Federal Reserve keeps the short-term interest rates at their highest in 22 years, the U.S. labor market and economy still maintain remarkable resilience.
Some analysts warn that US stocks may face a reshuffling risk. Jonathan Krinsky, Chief Market Technician at BTIG, noted that the Nasdaq 100 index has not experienced a pullback of more than 2.5% in 303 consecutive trading days, raising concerns about the market being overheated.
Additionally, a recent report from Citi shows that bullish positions in US tech stocks have reached their highest level in three years, leading to an excessively optimistic and unilateral market trend, which increases the risk of a market pullback.
Despite market volatility causing investor concerns, more analysts remain optimistic about US stocks. The trading team at JPMorgan believes that the US economy may be in the middle phase of economic expansion following an asymmetric recession, with inflation possibly being an exception, indicating potential room for US stocks to rise.
At this moment, investors need to stay calm and cautious. As Bobby Molavi, a trader at Goldman Sachs, said, "This feels very much like a market driven by Fear of Missing Out (FOMO), You Only Live Once (YOLO), and chasing momentum (MOMO) sentiments." He advises investors to maintain a long-term holding, albeit with some unease, as market volatility may continue.
