The tech stock selloff picked up right where it left off.
The Nasdaq Composite fell 1.4% on Wednesday after it dropped 1.5% yesterday. The S&P 500 was down 0.7%. Even the Dow was down 60 points, or 0.1%, after opening higher.
The Nasdaq is on track to fall at least 1% for second day in a row for the first time since April 4, when it fell 5.97% and 5.82%, respectively, according to Dow Jones Market Data.
Market breadth is still solid, with nearly 300 S&P 500 stocks set to close higher, but Palantir Technologies continued to struggle. It was joined by Target, down 8.4% on a CEO change, Intel, down 6.4%, and Micron Technology, down 5.7%, among the S&P’s biggest laggards.
Exchange-traded funds focused on momentum, risk, and growth, and the Magnificent Seven were all languishing. Low volatility and value continued to shine.
Frank Cappelleri, founder of technical analysis firm CappThesis, tells Barron’s that a pullback in the Nasdaq is to be expected at this stage.
“If you look at the price action since the end of April, the drawdowns have been exceptionally shallow—especially for a technology-heavy, broad index like this,” Cappelleri says. “In fact, there have only been two pullbacks greater than 3%.”
He wouldn’t be surprised if the pullback extends further. What matters more, he argues, is when the first round of dip-buyers emerge, and how much follow-through we see in the next round of buying.
“Not only have the recent pullbacks been shallow, but each time buyers have stepped back in, they’ve been immediately rewarded with higher prices—and often with new all-time highs, as well,” Cappelleri says. “The key question would then be: what happens if the initial bounce produces a lower high? From a technical perspective, that could mark the start of a bearish technical pattern—something we haven’t seen since the spring.”