Stocks tumble as tech selloff deepens
The tech selloff intensifies as the Nasdaq extends Monday’s losses. Yahoo Finance’s Zack Guzman and Akiko Fujita discuss.
Video transcript
AKIKO FUJITA: But Zack, let's start with the selloff right now that we are seeing in tech-- really a continuation of what we saw yesterday-- with the big tech names selling off in a big way. It does feel like the inflation fears materializing yet again. A lot of concerns right now about pent up demand as well as bottlenecks in the supply chain, the labor market as well, and a bounce in commodity prices. All that sort of contributing to what has been sort of this constant in the market, which is when we see that gauge for inflation concerns tick up, we start to see a sell off, especially in these tech names.
It does feel like a bit of a reversal, though, doesn't it? We were talking on Friday about that jobs number that was certainly much more disappointing than what the market had anticipated. At the time, we were saying it was sort of good news, bad news situation because investors had expected, potentially, that rates wouldn't rise as quickly, at least on the Fed side of things because of the slow pickup.
But we did get those comments from Loretta Mester earlier-- Brian Cheung speaking to her on our morning show-- where she said that she expects the year inflation to end the year above 2% with things falling back next year. What do you make of the rotation that we're seeing? It feels like this is kind of the story that we saw several weeks ago, and here we are again talking about the VIX up almost 18%.
ZACK GUZMAN: Yeah, I think that's the right read, Akiko. I mean, you can go back to Friday and what we were hearing, not just from Treasury Secretary Janet Yellen saying, look, you know, don't take this as one read. It's just one kind of data point in this ongoing recovery. We heard from President Biden even saying, look, you know, it's too early to say this jobs report is disappointing because it's, again, just one data point on the long road in recovery and we have a long way to go.
So I think the market was buying into that to a certain extent, but you're right to point to Loretta Mester's comments today on Yahoo Finance just a few moments ago, kind of talking about the inflation risks running hotter than a lot of expectations out there. So they're listening to that and we're seeing this. But again, kind of not an isolated event at all when you think about this rotation away from the growth names.
Just backing up and looking at May, I mean, bifurcation is all we were talking about yesterday on the show. When you look at tech performance, the FAANG names down 6% or so here in the month of May in just the 10 days in May. That alongside a 9% gain in energy materials, financials up 5% and 4%. I mean, when we kind of look into the S&P 500 now, kind of flat there over that time period.
You look at the winners and losers and point out that there is relative strength there, just not in the names that we've seen kind of running with the lead here over the last few months-- beyond, I suppose, the last few months-- looking back over the last two years or so. And really, it's the growth names and just kind of catching a lot of people I think flat footed, because we've been talking on the show about that rotation for quite some time. And the expectation is, as inflation risks continue to rise, this is what we're just going to see play out-- more and more people kind of moving away from those growth names that had been winners.
And you look at the QQQ-- I'm not sure if we have this chart here that we can pull up right now-- but you look at the short term, we were hearing from Fund Stratton in their note to investors, kind of highlighting the fact that we broke below the 50-day moving average yesterday. At the open here we were moving below the 100-day moving average. And now, if you kind of extrapolate it out here to look at the 200-day moving average, you're still looking at about a 7% decline on the QQQ-- the NASDAQ 100 where we look at some of those big tech names here. So still potential downside to come. Today, again, not just an isolated blip, not isolated fears. This is just kind of the trend we've been seeing play out.
AKIKO FUJITA: And Zack, when you talk about sort of the run up that we've seen in these growth names, particularly on the tech side, a lot of people pointing to Cathie Wood's ARK Innovation ETF yesterday falling to its lowest level since November. And we have seen it fall yet again. The big weight in that ETF, of course, Tesla, which shed about 6% yesterday, down again today. So these are some of the names that we're going to be watching really closely today as we continue to see the selloff.
And we should point, we have seen bond yields go up as well. A lot of that, of course, a really good gauge of where the inflation fears are right now with the 10-year yield. Wonder if we can pull up that chart there to see where it. It is-- I think it was trading above 1.6% there, so we're going to watch that as well.
