Market Update: U.S. Stocks Sputter in Final Hour as Morgan Stanley Warns on Tech Shares

U.S. stocks declined on Thursday, with the Nasdaq giving back earlier gains after Morgan Stanley issued a fresh warning on overstretched technology companies.

Nasdaq Recoils from Record Territory

The Nasdaq Composite Index closed at 7,891.78, where it was virtually unchanged compared with the previous close. The tech-driven index is by far Wall Street’s best performing average this year, rising 14.3% since January.

The broader S&P 500 Index edged down 0.1% to 2,853.58, with losses mainly concentrated in energy, financials and industrials shares. A total of six S&P 500 sectors finished in negative territory.

Dow industrials fell 74.52 points, or 0.3%, to close at 25,509.23. A total of 16 index members finished in negative territory.

Morgan Stanley Warns on Tech Stocks

U.S. investment bank Morgan Stanley has issued a fresh warning on semiconductor stocks, adding to an already negative outlook on the technology sector.

Cyclical indicators are flashing red,” analysts wrote in a report, as quoted by Bloomberg. “Elevated inventory and stretched lead times leave no margin for error as any lead time adjustment or demand slowdown could drive a meaningful correction.

The high-flying tech sector ran into volatility last month amid mixed corporate earnings and a gradual shift away from growth stocks. The sector remains by far the best performing S&P 500 component of the past year but could face headwinds now that China is ramping up its trade war rhetoric.

Cryptocurrency Market Bounces from Yearly Low

Cryptocurrency prices including bitcoin staged a modest relief rally Thursday after a 24-hour selloff wiped more than $35 billion from market values.

The cryptocurrency market’s total capitalization reached a high of $230.3 billion after bottoming near $219 billion earlier in the day. Trade volumes averaged more than $13 billion, according to CoinMarketCap.

All major crypto assets in the top-ten reported gains Thursday. Bitcoin added 2.6% to $6,509, Ripple XRP gained 2.8% to $0.345 and bitcoin cash finished 2.2% higher at $604.

Although the market remains in a firm downtrend, reaction to the SEC’s decision to delay a ruling on a bitcoin exchange-traded fund was likely overdone. Bitcoin and other cryptos are still entrenched in oversold territory, which suggests that a short-term recovery is possible. Long-term holders should take solace in the fact that crypto assets are attracting a bigger market with the introduction of custody services and the entry of major stock exchange operators into the space.

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.

Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi

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