'Caution But Not Bearishness': Analysts Respond To Tech Stock Plunge

Large-cap tech stocks were hammered on Thursday, with the S&P 500 dropping 3.5% and the Nasdaq trading lower by 5%. While tech investors took a big hit on the day, the sell-off came with both the S&P 500 and the Nasdaq trading at all-time highs.

The sell-off was led by Apple, Inc. AAPL and Tesla Inc TSLA, both of which split their stock on Monday. Following Thursday’s session, Apple is down more than 10% from recent highs, while Tesla declined 18% in just three days.

Several analysts and experts have weighed in on Thursday’s sell-off and how investors should approach the SPDR S&P 500 ETF Trust SPY and the POWERSHARES QQQ/UT SER 1 QQQ in the wake of the drop.

Caution Warranted: DataTrek Research co-founder Nicholas Colas said the market continues to trade similarly to the way it did in 2009 during the early stages of its recovery from the financial crisis.

“To the letter of the Playbook, we may need to see another 5% decline but given 2020’s general outperformance that may not come to pass,” Colas said Thursday. “Today was a bad day, and our price-leads-fundamentals mantra says caution – but not bearishness – is in order.”

Nigel Green, founder of deVere Group, said savvy, long-term investors will likely see an opportunity in high-growth tech names now that Thursday’s drop removed some of the froth from the market.

“With some talk of markets being on the brink of correction territory, profit-taking, mispricing of high-quality equities, and lower entry points, this will be seen by many as a major buying opportunity – especially after global equity markets recently hit new highs,” Green said.

Stay The Course: Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance, is encouraging his clients to stay the course with their long-term investing plans.

“We don’t believe the bull market is going to end any time soon, but a healthy pullback or even a correction is part of all bull markets and it’s easy to point to the November election, news that China is pursuing their own home-grown chip-making industry, or the upcoming flu season as a reasons to get bearish,” Zaccarelli said.

Peter Essele, Head of Portfolio Management for Commonwealth Financial Network, said the sell-off seemed to be concentrated mostly in red-hot tech stocks, suggesting momentum traders may be rushing for the exits.

“It’s possible that today’s market is an indication of things to come, where fundamentals play a larger part in valuations, as opposed to the irrational exuberance that has persisted in recent months within tech,” Essele said.

Benzinga’s Take: Whether or not Thursday’s sell-off is a big deal simply depends on your investment time horizon. Short-term and medium-term traders are rightly concerned that the record rally since late March has finally run out of steam ahead of a potentially chaotic U.S. election in November, while long-term investors can simply sit back and ignore the day-to-day and week-to-week fluctuations in the market.

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