Market Update: Tech Rollover Sinks the Nasdaq; Cryptos Fail to Sustain Rally
U.S. stocks declined sharply on Tuesday, extending their string of extreme moves as a rollover in the technology sector triggered huge losses for the major indexes. Meanwhile, the threat of a trade war and geopolitical risks continued to weigh on investor sentiment.
Stock Rally Loses Steam
The major stock indexes fell hard on Tuesday, giving back a huge chunk of yesterday’s gains. Nowhere was this more apparent than the Nasdaq. The technology-driven average plunged nearly 3% to close at 7,008.81, as shares of Apple (AAPL), Amazon (AMZN) and Facebook (FB) declined sharply.
The S&P 500’s technology index plunged 3.5%. As a result, the large-cap index settled down 1.7% at 2,612.62. Other sectors to record significant losses included financials (-2%), industrials (-1.4%) and healthcare (-1.2%).
The Dow Jones Industrial Average declined 344.89 points, or 1.4%, to 23,857.71. All but five of its 30 components recorded declines.
Consumer enthusiasm for U.S. stocks has declined to its lowest point since the 2016 presidential election, according to the Conference Board’s March survey of consumer confidence. Only a net 6% of Americans surveys believe stocks will be higher in one year, down sharply from nearly one-third who said the same back in January.
Volatility returned to Wall Street in a big way in early February and hasn’t really left. The Chicago Board Options Exchange (CBOE) VIX index, which tracks expected volatility over the next 30 days, is currently trading higher than the historic average. That was exceedingly rare over the past two years.
The VIX rallied 7% on Tuesday to close at 22.50, having touched a session high above 24.00. The fear index trades on a scale of 1-100 where 20 represents the historical average.
Crypto Assets Continue to Struggle
Tuesday marked another disappointing session for cryptocurrencies, as bitcoin and the major altcoins failed to sustain an early rally. After hitting a session high of $315 billion, the crypto market cap reversed course to settle around $302 billion, according to CoinMarketCap.
Bitcoin, which now controls roughly 45% of the market, fell below $8,000 for the second time in as many days. The world’s largest cryptocurrency continues to trade above a key support line near $7,700, which could limit a further breakdown in price. At the time of writing, bitcoin was trading just above $8,000.
Twitter’s decision to ban crypto advertising triggered a sharp decline in the market on Monday. However, investors shouldn’t expect the decision to have much of an impact on the digital asset class. For starters, crypto exchanges don’t rely on paid search to generate traffic or convert website visitors into clients.
According to a recent study by Similar Web, paid search represents less than 1% of overall traffic to cryptocurrency exchanges. Although the analysis omitted Twitter, it did include Facebook and Google, which were the first tech giants to issue comprehensive bans on cryptocurrency ads. In the case of Google, the ban will come into effect at the start of the third quarter.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.