Here’s why the stock market just plunged

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It’s far from a buzzing market, but a day after stocks hit record highs is a market which is being pierced by valid fears.

The Dow Jones Industrial Average fell nearly 500 points in early Thursday afternoon, as investors feared the fall in the 10-year Treasury yield would signal slower economic growth later this year. Traders reasoned about this potentially dreaded macroeconomic slowdown. First, the Delta variant of COVID-19[feminine qui déferle sur le monde. Et deuxièmement, la Réserve fédérale a décidé de réduire ses achats d’obligations avant la fin de l’année.

D’où les nouvelles inquiétudes exprimées par les traders sur les valorisations en constante augmentation dans de nombreux domaines du marché des actions aujourd’hui.

“Si je calcule les chiffres, je mets le marché à environ 4% surévalué. Le potentiel de hausse d’ici la fin de 2021 est de 0,4%, ce qui est un nombre assez bas. Vous n’obtenez jamais ces chiffres exactement, mais c’est certainement pas un nombre très convaincant », a déclaré Conseillers Hugh Johnson fondateur et directeur des investissements Hugh Johnson sur Yahoo Finance Live. “Donc, les niveaux de valorisation sont tels que très franchement – et c’était avant que nous ne voyions ce qui s’est passé aujourd’hui [in markets] – they are not very convincing. “

The sell-off so far is widespread.

All the components of the Dow are in the red, with the exception of somewhat defensive names like IBM, Amgen, and Nike. The Nasdaq Composite, Russell 2000 and S&P 500 were also firmly in the red.

The Yahoo Finance Trending Ticker page was riddled with high-profile alumni getting pounded during the wide risk session.

Coinbase is the number one trend ticker on Yahoo Finance, falling 4% amid another rout in cryptocurrency prices in the last 24 hours. Semiconductor stocks also continued to relatively underperform the market, with chip giant AMD leading the way for a 4% loss on the session.

“Stocks like Nvidia, Microsoft, Apple, Google, Intuit, Cloudflare have all become overbought in the short term. The Nasdaq Composite Index and XLK Technology ETF have also become overbought,” said Matt Maley, chief strategist of Miller Tabak markets in a research note. “We’re not saying that long-term investors should aggressively get rid of these names. However, they should always consider raising cash in these (and other) names now… so that they have money. money to put to work once the correction has played out. “

Typically, strategists don’t think that a turbulent session marks the start of a correction (10% pullback) or a bear market (20% pullback).

“I’m not embracing this bull market. I still think it’s a bull market that still has a way to go,” Johnson said. “It’s not the start of a bear market that’s going to be accompanied by a recession. It’s just not in the cards.”

Brian Sozzi is an editor and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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