Nasdaq down 1.8%, "fear index" rises: traders sell IT stocks for the second day

"Technology" index Nasdaq Composite was down 1.8% after the opening of major U.S. trading, while the broad market index S&P 500 was losing about 0.9%. The VIX index, known as the "Wall Street Fear Index," rose more than 7%. Investors sold off technology stocks for the second day in a row in anticipation of the minutes of the Fed's July meeting and because of general concern about the hype surrounding artificial intelligence.

- Index Nasdaq Composite at the trading on August 20 at the moment fell to 20,931.86 points - by 1.8% compared to the closing level a day earlier. The index continued to decline for the second day in a row - after losing 1.5% on August 10.

- The main U.S. stock index S&P 500 was losing 0.9% at its low by the time this text was published - it reached 6350.48 points.

- The blue-chip index Dow Jones Industrial Average held up a little better, losing only about 0.33%. A day earlier, it was the only one of the four major U.S. indices that managed to grow, albeit by an insignificant 0.02%.

- The Russell 2000 index of small-capitalization companies was down about 0.9%.

- In contrast, the VIX index, also called the "Wall Street fear index," jumped nearly 9% (about 1.4 points) to about 17 points.

- Nvidia shares fell by almost 4% and reached the lowest level in almost a month. Shares of another chipmaker, TSMC, fell the same way, while quotes of Palantir, a developer of AI for civil and military needs, collapsed by 10%. Investors also sold off Intel and Micron securities: the former fell by almost 8% and the latter by 7%.

Traders began to fix profits on the most expensive securities in anticipation of signals from the Fed on the future course of rates, notes Bloomberg. On Wednesday the minutes of the July meeting of the Fed will be released, at which the regulator kept the rate, but for the first time since 1993 two members of the Board of Governors of the Fed opposed the general decision, CNBC adds. In addition, on Friday, the head of the Fed Jerome Powell will speak at the economic forum in Jackson Hole. Market participants are spooked by overheated valuations of tech sector securities amid the AI boom at a time when the Fed is likely to fail to implement the massive policy easing expected earlier this year, Bloombyerg explains.

It's too early to draw conclusions about whether the two-day selloff is something to worry about or a short-term phenomenon, said analyst Matt Maley at Miller Tabak. "We need to see if stocks will continue to fall before raising yellow warning flags," Mailey noted in a Bloomberg statement. - As we enter a seasonally challenging period for the stock market, investors could get nervous very quickly if the tech sector - and with it the entire market - really starts to show a significant decline."

"Not surprisingly, some investors are locking in profits in technology stocks, which have seen incredible gains - individual securities are up more than 80% from their April lows. Trading volumes tend to be quite low in late August, leading to sharper swings," added Carol Schleif, chief market strategist at BMO Private Wealth.She also noted that investors are remaining cautious ahead of an economic forum with the Fed chief on Friday. "If Powell's rhetoric turns out to be tougher, it could add pressure on tech stocks as continued higher rates are generally a headwind for the sector," Schleif summarized.

In contrast, Wedbush analyst Dan Ives, a well-known Wall Street bull on tech stocks, sees the current sell-off as an opportunity to buy into the drawdown in the major AI winners. "Skepticism will persist, and during sell-offs amid volatility, the bears will come out of hibernation in an attempt to trigger new tensions ... We've seen this dynamic many times since January 2023," Ives wrote Wednesday morning on social media X. - "In our view, the bull cycle in the tech sector will remain in place for at least another two to three years, given the trillion-dollar investments in infrastructure, software, chips, energy and artificial intelligence applications." This continues to be our benchmark and investment map for customers."

This article was AI-translated and verified by a human editor