Nasdaq leading trouble
The first trading day of May started with the uptrend in stock markets. On Wall Street, DJI ended up 0.7% on Monday, while SP500 gained 0.3%. However, as a sign of faster recovery with reopenings in many States in the USA getting more precise, the Tech-heavy Nasdaq Composite lost 0.4%.
Today, the market started with free-fall among all leading indices, not just in the US, also in Europe. Scary Tuesday Tuesday started with the US market opening, as VIX jumped above 22 and sent the stock markets to their two weeks low.
There are three reasons for this free-fall:
- As I mentioned in the weekly outlook, we expect profit-taking at these high levels, especially in more expensive stocks.
- Faster recovery means being closer to the return of natural life, which puts the heavy-tech stocks on sale.
- Another shape of profit-taking, selling the higher-priced stocks and investing in the companies expected to gain from the reopening of economies.
The Dow Jones Industrial Average fell 186 points, or 0.55%, S&P 500 down by 51 points, or 1.22%, while the Nasdaq Composite dropped 350 points or 2.55% in the first trading hours.
What we are expecting is to continue dropping lower after correction. Generally, the atmosphere around the heavy stocks is not favorable.