Market Update: Tech Rollover Triggers Massive Slide for Wall Street as FAANG Stocks Plunge
U.S. equity markets plunged on the first day of the second quarter, as global trade tensions and a mass exodus from so-called FAANG stocks weighed on the major indexes.
Sour Start to Q2
Investors rushed out of the technology sector on Monday, with Facebook, Amazon, Apple, Netflix and Google parent Alphabet (FAANG) leading the sector downturn. The technology-focused Nasdaq Composite Index declined 2.7% to close at 6,870.12, giving up its gains for the year.
Monday’s retreat extended an extremely volatile streak for FAANG companies, which have lost a staggering $324 billion in market cap since Mar. 12. Facebook’s privacy scandal is largely to blame for the sector rollover in recent weeks as investors questioned the social media company’s handling of consumer data.
The S&P 500 large-cap index was down 2.1% by the close to settle at 2,584.36. All 11 primary sectors finished in the red, with consumer discretionary stocks falling 2.8%. Consumer staples and information technology each fell 2.5%.
Meanwhile, the Dow Jones Industrial Average fell 458.92 points, or 1.9%, to close at 23,644.19. All but two of its 30 index members finished lower.
A measure of implied volatility known as the CBOE VIX surged 18.3% to close at 23.62, its highest in over a week. The so-called “fear index” is up more than 112% this year. With contango out of the equation, the VIX is pointing to a new market paradigm governed by risk aversion. This is confirmed by the recent acceleration of the iPath S&P 500 VIX Short-Term Futures ETN (VXX), which only last week completed a bullish crossover.
Crypto Market Stages Tepid Recovery
The cryptocurrency market experienced a modest bounce on Monday that was not unlike the one we saw at the beginning of the weekend. The asset class touched a session high of $267.1 billion, according to CoinMarketCap, although notable gains were limited to a few altcoins like Stellar Lumens, Tron and Zcash.
The bears controlled the market during the Easter long weekend, as bitcoin fell toward $6,400 and Ethereum broke below the key $400 support level. Lacking clear fundamental cues, the declines appear to have been motivated by technical trading and a general loss of interest among speculators, especially in altcoins.
Long-term indicators make a strong case that most major crypto assets are oversold, leading us to believe that a new bottom formation is materializing. Bitcoin’s rebound on Monday was especially notable following the “death cross” bearish reversal over the weekend. At the time of writing, bitcoin was trading around $6,908, down from an earlier high of $7,213.
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