Why tech stocks are lower today: Wedbush Securities's Joel Kulina
Joel Kulina, Wedbush Securities head of technology and media trading, joins 'Tech Check' to discuss why tech stocks are getting hit hard today and what he's watching now. For access to live and exclusive video from CNBC subscribe to CNBC PRO: https://cnb.cx/2NGeIvi
The major averages took steep losses to start the week as investors continued their rotation out of technology stocks amid rising bond yields.
The Dow Jones Industrial Average fell about 360 points, despite a large gain in Merck. The S&P 500 shed 1.5%. The technology-focused Nasdaq Composite was the relative underperformer, dipping roughly 2.3%.
Large tech shares like Apple, Nvidia, Amazon and Microsoft were lower as investors eyed bond yields. A surge in rates to end September knocked highly valued tech stocks. The 10-year Treasury yield was slightly higher Monday, trading around 1.48%. The 10-year U.S. Treasury yield hit 1.56% last week, its highest point since June, with investors concerned about inflationary pressures and tighter monetary policy.
Social media giant Facebook lost 5.6% after being accused of a “betrayal of democracy” by a whistleblower who revealed her identity on Sunday.
“The financial markets are adjusting leadership to reflect another Covid-induced reopening cycle,” said Jim Paulsen, Leuthold Group chief investment strategist. “That is, commodities are rising, bond yields are rising, cyclical sectors and small cap stocks are outpacing, and technology and growth stocks in general are underperforming.”
On the positive side, Tesla rose nearly 1% after the company said this weekend that it delivered 241,300 electric vehicles during the third quarter, well above analysts estimates.
Merck shares were up another 1.5%, following through on an 8% surge on Friday after the drug maker said its oral antiviral treatment developed with Ridgeback Biotherapeutics for Covid-19 reduced the risk of hospitalization or death by 50% for patients with mild or moderate cases.
Some airlines stayed in the green after Barclays upgraded the North American Airlines sector to positive from neutral. Southwest rose 2% after an upgrade to overweight from equal weight from the same analyst.
Energy stocks also rose amid an uptick in oil prices. Exxon Mobil gained 1.4% and ConocoPhillips rallied 2.7%. Chevron advanced 1.3%.
“At these extremely lofty valuations stock prices are very sensitive to modest changes in incremental capital flows and it appears that there is some ‘performance chasing’ going on as the energy space is attracting capital which is trying to make it look like they had exposure to oil & gas (window dressing) and that means less money flowing into tech,” said Mark Yusko, Morgan Creek Capital Management CEO and chief investment officer.
Friday marked the first trading day of October and the final quarter of 2021. The major averages rose that day on promising data for Merck’s oral treatment for Covid-19, which boosted stocks tied to the economic reopening.
The market rebound followed a rough September plagued by fears of inflation, Federal Reserve tapering and rising interest rates. The S&P 500 finished the month down 4.8%, breaking a seven-month winning streak. The Dow and the Nasdaq Composite fell 4.3% and 5.3%, respectively, suffering their worst months of the year.
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