But the market should rebound, according to the saying of WOLF STREET that “nothing goes wrong in a straight line”.
By Wolf Richter for WOLF STREET.
Monday would be a good start to bounce back. It could also start on Tuesday or in November or anytime. And maybe not much rebound. But the market should bounce back from what it went through in September, or indeed since August 16, which marked the end of the bear market rally.
The unsightly demise of this bear market rally adds to chilling parallels with the dotcom bust, which was also interrupted by a rally in the summer of 2000, when the Nasdaq Composite rebounded 33% without returning to its previous high. , then finally crashed 78%, from which it would not fully recover until 15 years later, in July 2015, after the Fed threw trillions of dollars into the market with QE. But at the time, inflation was well below the Fed’s target. Now the inflation is raging well above the Fed’s objective.
So since this summer’s bear rally ended on August 16, the S&P 500 has fallen 16.7% and the Nasdaq 19.5%, both barely above February 2020 levels.
Many stocks on my list of imploding stocks have plunged 50% or more over the same period, reaching new lows after climbing 100% in previous weeks – such as Carvana. [CVNA] which went from $20 on July 14 to $54.59 on August 16 and then to $20.30 on Friday September 30. Up 170% in five weeks, and dropping everything over the next six weeks. Carvana is down 95% from its intraday high on August 10, 2021.
That’s how crazy this market still is, and that’s why the bottom is nowhere in sight, and there’s absolutely no capitulation, but stocks should rebound.
In September, the S&P 500 index fell 9.3%, the worst monthly decline since March 2020 and the worst September since the dotcom meltdown.
All sectors were affected in September, even energy. Health is the least affected (-2.6%). The most affected sectors in September were: information technology (-12.0%), communication services (-12.1%) and real estate (-13.1%).
Year-to-date, energy is the only sector up (+34.9%), although the sector fell 9.3% in September, according to the S&P Dow Jones indices.
In other chilling parallels to the dotcom slump, year-to-date: the two tech-related sectors – communications services and information technology – have plunged 31% and 39%. And several of the Big Tech stocks have plunged far more than that from their respective highs; more in a moment.
|S&P 500 Index Sectors||September||YTD|
But it’s worse when compared to their respective peaks:
The S&P 500 index closed Friday at 3,586, down 25.6% from its intraday high on Jan. 3, and where it first stood in November 2020.
The Russell 2000, which tracks small cap stocks, is down 31.8% from its November 5 high, having retained its function as an early warning signal.
The Nasdaq closed at 10,576, down 34.8% from its intraday high on Nov. 22, the same day Microsoft CEO Satya Nadella sold 50.2% of his Microsoft stock in a series frantic transactions, totaling $285 million. On the list of best-timed insider trades of all time, he has to be right at the top. Since then, Microsoft shares have plunged 33.4%, to $232.90, the lowest closing price since March 2021.
The Big “Tech” plunges from recent highs.
But Microsoft is the second best performing stock in the Big Tech stock framework. Apple is the best performer, down “only” 24.5% from its early January 2022 high.
The worst performing Big Tech stocks are Meta, Netflix and Nvidia, all down around 65% from their respective highs. These are massive sales for large companies.
Two of these companies – Cisco and Intel – had reached their peak 22 years ago; Cisco is down 51% and Intel down 65% from the peak 22 years ago.
The “high” declines shown in the chart are declines from recent highs.
|“Tech” Giants||$, Sept. 30||From above||High date|
Big Tech stocks are now back where they first were…
- Apple: January 2021.
- Microsoft: January 2021.
- Tesla: January 2021.
- Alphabet: January 2021.
- Amazon: April 2020.
- Cisco: November 1999. Peaked in March 2000 at $82 and spent 22 years declining 51%, a nightmare come true for buyers and holders of technology stocks.
- Salesforce: July 2018.
- Adobe: September 2018
- Intel: 1998. Peaked in the infamous bear market rally in 2000 to $75 and spent 22 years declining 65% – an even bigger nightmare to buy and hold tech stocks.
- Meta: January 2017.
- Nvidia: August 2020
- Netflix: April 2018
When a bubble like this unfolds, it can get brutal. As Cisco and Intel show, some stocks may “never” return to their bubble highs – “never” meaning either “never” or just beyond a reasonable timeframe for long-term investors. During the years of the dotcom bust and the years that followed, hundreds of stocks disappeared, either at zero or bought for a few dollars a share. We only remember that the winners came out of the dotcom bust and flourished, like Amazon. But Amazon was a rare exception.
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