Stock futures flat after technology-led sell-off
The sell-off in technology shares worsened on Tuesday as investors rotated out of companies that led the market's historic comeback from the coronavirus recession.
Shares of athletic retailer Lululemon and messaging platform Slack fell in after hours trading on Tuesday, despite both companies reporting better-than-expected earnings.
Disappointing coronavirus vaccine news also pressured the futures market on Tuesday. AstraZeneca shares plunged in extended trading after the company said a late-stage trial of its Covid-19 vaccine candidate has been put on hold due to a suspected serious adverse reaction in a participant in the U.K.
U.S. stock futures were flat overnight trading on Tuesday, following the technology-led stock rout that continues to pressure financial markets.
The tech-heavy Nasdaq Composite underperformed once again on Tuesday — falling more than 4% — after suffering its worst week since March. The Nasdaq has lost more than 10% in the past three sessions, officially entering correction territory. The index is still more than 63% from its 52-week low in March.
In addition to the high flying FAANG names and stay-at-home stocks, chip stocks were among the biggest losers as tensions between U.S. and China continued to escalate. Meanwhile, a 21% drop in Tesla — its largest single-day stock drop — dragged down the Nasdaq. Tesla was excluded from joining the S&P 500 on Friday.
The Dow Jones Industrial Average cratered more than 600 points, weighed on by a near-6% drop in Boeing. The S&P dipped 2.7%, for its third straight negative day for the first time since June 11.
Many on Wall Street believe the technology weakness derived from worries that the massive tech run-up pushed valuations to unsustainable levels. Even with last week's pullback, the Nasdaq is up more than 60% from its March bottom.
"Some are suggesting this is the start of another dramatic sell-off, similar to the spring of 2000 when the 'tech bubble' burst. I highly doubt that," Kristina Hooper, Invesco Chief Global Market Strategist, said in an email to CNBC. "I think of this rout not so much as a correction, but as a digestion given that the NASDAQ Composite rose more than 60% from its March bottom in the course of less than six months. All In all, I think this is a healthy period of consolidation after a dramatic run-up."
The technology rout gave life to some of the cyclical stocks, those most sensitive to the recovery of the economy. Airlines, cruise lines and some retailers outperformed on Tuesday.
Aviva Investor's Susan Schmidt told CNBC the day following a market holiday is often met with investors focusing intently on the markets, which increases volatility. The Cboe volatility index, an investor fear gauge, spiked above 31 on Tuesday.
The Labor Department's Job Openings Labor Turnover Survey for July will be released at 10:00 a.m. ET on Wednesday and the report —although somewhat dated — should give investors some insight into the labor market. Analysts polled by Dow Jones expect hiring rose 6.0 million in July, up from 5.9 million in June.
American Eagles Outfitters reports quarterly results before the bell on Wednesday. GameStop, RH and Zscaler report earnings after the bell.
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