September 14, 2020
Last week was second consecutive week of increased volatility and mixed returns, and last Friday was a perfect example. The Dow and S&P 500 finished the week on a solid note, gaining 131.04 and 1.78 points, or +0.48% and +0.05%, respectively. The technology sector continued its sell-off Friday, dropping 66.05 points, or -0.60%, and concluded the weakest weekly performance since March losing 4.06%.
As volatility would have it, the tech sector is staging a rebound this morning as market futures for all three major indices are posting strongly to the upside. After months of astronomical performance, valuations got too rich for investors and sparked a sell-off in the biggest names of the tech sector. As it was seen last week, the day following a sell-off was a day of bargain hunting, as other investors looked for their favorite tech names whose price had dropped – i.e., “buy on the dip”. Then as prices rallied, “sell on the rally” set it.
The markets have a lot to deal with in the coming months. Stocks have been hampered by uncertainty about the presidential election, a slowing economy from the COVID business restrictions and the renewed market volatility. “This isn’t a message that we’re going back to February, March markets,” said James McCormick, referring to the historic declines that took place earlier this year. “But I think the upside is going to be a bit capped here until we get through some of these events and risks.”