After surging in early trading, the Nasdasq - together with various cryptocurrencies - suddenly slumped and dropped as much as 1% from its intraday highs two hours into trading. That's what traders could agree with; where they clearly disagreed, was on the reason for the swoon with everything from the velocity of last week’s rally, this morning’s economic data and the Supreme Court’s decision to hear arguments on the Trump administration’s travel ban and being cited according to Bloomberg.
In other words, everyone blissfully rode the momentum on the way up, and now it's time to come up with the most convincing story why there are more sellers than buyers.
Here is what did happen: From a high of 5,845.15 touched at 9:34 a.m. New York time, the Nasdaq 100 fell as low as 5,770.15 at 11:23 a.m., trimming its 2.1 percent rally from last week. Nvidia lost 2%, bringing its three-day drop to 5.3%, while Amazon.com, Alphabet, Facebook and Microsoft each declined more than 2 percent. The Nasdaq Biotechnology Index slipped 0.8 percent, paring last week’s 9.6 percent advance.
Here are the wildly speculative explanations:
- Yousef Abbasi, global strategist at Jonestrading Institutional Services in New York: “Tech names have lost momentum. I doubt traders care [about the Supreme Court decision] -- algos, probably. They might have seen that headline and decided to de-risk in tech or other sectors it sees as ‘immigration ban’ impacted.”
- Mark Kepner, managing director and equity trader at Themis Trading LLC in Chatham, New Jersey, says the Supreme Court decision is probably not related: “Utilities are really strong -- I think it’s the weaker durable goods and some of the commentary from Fed officials being not necessarily sold on another rate rise this year. It’s a lower inflation outlook, oil gave up gains too.”
- Thomas Garcia, head of equity trading at Thornburg Investment Management Inc. in Santa Fe, New Mexico: “Tech has for sure led the way this year and I think some profits are being taken. Depends on how you crunch the numbers as to how expensive or inexpensive some of these stocks are. What do investors value? Earnings, cash flow, growth etc.”
- Larry Weiss, head of trading for Instinet LLC in New York: “The market has shown the ability to shrug off political uncertainty, so any review of the travel ban by SCOTUS not really driving the market. Volume is light, so spreads are wide, and we would expect to bounce around in a range in the absence of market moving news.”