The tech sector which helped Wall Street recover from March 2020 market crash, entered a major correction last week.
After some market rout, especially in the tech sector, Dow Jones futures have started on a positive note in early trading on Tuesday. Futures of the Dow Jones Industrial Average surged nearly 200 points today morning. Futures for other indexes like Nasdaq-100 and S&P 500 were also in the positive territory.
The tech sector which helped Wall Street recover from March 2020 market crash, entered a major correction last week. After the March crash, last week was the worst for tech stocks like Apple Inc (NASDAQ: AAPL), Amazon.com Inc (NASDAQ: AMZN), Microsoft Corporation (NASDAQ: MSFT), and Facebook Inc (NASDAQ: FB). Both – Dow Jones and S&P 500 corrected by 2% last week, their biggest correction since March. The massive rally in the tech-space had already given some warning signals, as per some experts.
The government-initiated lockdown and the boost to work-from-home got tech stocks soaring. More businesses and individuals were investing in online and cloud-based services. However, it looks like the investors in the tech space had enough party. Also, the valuations at which some of the giant tech companies are trading have already priced-in the growth.
We have seen some aggressive purchase of growth stocks over the last few months. It is much likely that we can see some correction in the tech space from here on.
Listen to It From the Experts
Matt Maley, chief market strategist at Miller Tabak, told CNBC that some of the megacap tech companies are in the overbought regions. He also thinks that the S&P 500 is trading at elevated valuations. Speaking about the current scenario, Maley said:
“Given how extreme many of the indicators we follow had become by early this past week, we believe it will take more than just a mild decline to work off those conditions. Therefore we still believe a correction of more than 10% is probable.”
On the other hand, the tech war between the two biggest economies – U.S. and China continue to escalate every single day. China has also accused the United States of bullying while launching its global data security initiative on Tuesday.
There has been some mounting pressure on Chinese tech companies in the U.S. Last month, President Trump passed an executive order to ban the popular short-video application TikTok. since then, American tech giants like Microsoft and Oracle have chipped in to acquire the social media app.
America has been constantly citing the issue of security threats while working with Chinese companies. There have been severe allegations that China’s tech-companies have been passing on crucial data of American citizens to the Chinese Communist Party (CCP) which America sees it as a national security threat.
Well, all these developments can give a further boost to the American tech sector which massive grown in size over the last decade surpassing the entire European stock market.
Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.