The highest-flying of Wall Street’s stock-market darlings are now taking a major beating.
Tesla Inc., Nvidia Corp., Netflix Inc. and Facebook-owner Meta Platforms Inc. have all lost 10% to 20% over the past few weeks. That wiped several hundreds of billions from their market values, with Meta alone losing some $230 billion since its shares hit a September record.
The selloff gained force Friday, driving the so-called NYSE FANG+ Index of the tech-industry’s giants into correction territory, or a 10% drop from the peak. That’s not seen as a good sign heading into the end of the year, the most illiquid trading season.
These so-called momentum stocks, including Nvidia and high-flying software names, were among Wall Street’s top performers in 2021, with their high levels of growth spurring a frenzy of buying.
But that’s now sharply reversing, with the hawskish signals from the Federal Reserve leaving investors bracing for rising interest rates that will affect some of the most highly valued stocks the most. Adobe Inc.’s 9% drop on Friday and Salesforce.com Inc.’s nearly 12% decline Wednesday among this week’s notable moves.
“This has driven a ‘stealth correction’ in U.S. equities, of those stocks with the highest valuations, growth expectations, and need for equity-market funding,” said Ben Laidler, global markets strategist at eToro.
New 52-week lows on Nasdaq Composite highest since March 2020
The weekly fund flow statistics from Bank of America Corp. also showed investors were rushing to the ultimate safe-havens like cash and U.S. Treasuries.
Institutional money is also pulling back, said Steen Jakobsen, chief investment officer at Saxo Bank. He said “the Fed pivot to inflation” has led to this rout and that taking profit at this point makes sense because markets would remain illiquid during the Christmas season.
Tesla tumbled as much as 7% Friday, with Nvidia down as much as 6%, both of which weighed heavily on the the S&P 500 and Nasdaq 100 Index. Moves in shares of companies that make no profits has even been worse: Rivian Automotive Inc. is down 41% off its all-time highs, while rival Lucid Group Inc. is off 23%. The Nasdaq Biotechnology Index tumbled to the lowest in over six months and is on track to end the year lower.
With valuations still sky-high, the rout is likely to be far from over. Some traders see paralells in 2018’s year-end market crash, when the Nasdaq 100 tumbled 17% in the fourth quarter.
“October 2018 and today is eerily similar,” said Jim Dixon at Mirabaud Securities.