Experts have no one else to blame on but the negative coronavirus headlines when we speak about the massive drop faced by DOW Jones and the other significant index of the US Stock market. The only thing that every other person associated with the Wall Street is completely ignoring is the fact that the reason for such a fall is that investors have finally started to price in the risk of a long impending recession.
S&P 500, DOW and Nasdaq plummeting together
Every major index of Wall Street opened to a lower number at the start of the week. The DOW index was off by a huge 1080 points and the drop is said to be the worst in the last 2 years. Such huge is the loss that is wiped out all the gains from the index for the year 2020.
The S&P 500 index of large-cap stocks lost out around 3-4% with as many as 11 sectors reporting losses. Information technology and energy stocks were the hardest hit with an average drop of 4%.
The plummeting tech stocks took down the tech-heavy Nasdaq Composite Index considerably. It ended the day with a huge drop of 4.3%.
While on the surface, the negative headlines doing the rounds regarding the spread of coronavirus is focused as the result of such decline, there’s a lot more to it. IHS Markit releases private sector data on Friday which showed that the US Economy is on the path to come to a halt in February. The flash services PMI reading of 49.6 is touted as the worst in the past 6 years. If the report is analyzed deeper, it is seen that the US services company has reported a drop in their new orders for the first time since October 2009. Such numbers do leave an impact on the overall GDP of the country.
Another major reason is that the tech stocks were overvalued. Expert fund managers say that such overvalued stocks can easily enter the bear market territory as the ghost of recession comes closer. According to experts, the stocks of Apple are highly overvalued due to the pricing of the same in the 5G Supercycle. Such tech stocks are extremely overpriced and in this period of an upcoming recession, the investors will start pricing the stocks and this is when these tech stocks will face a massive drop.
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