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The sell-off in the US stocks is not necessarily a signal that US economic risks have escalated significantly, but it has been because of the unwinding of extended positions in momentum and tech stocks, according to a report by UBS.
In the American markets on Monday, the Nasdaq index tanked 4 per cent, while the S&P 500 also closed more than 2.7 per cent lower, causing stock markets around the globe to trade in the red. The market participants saw S&P 500 losing over USD 4 trillion market valuation."The sell-off has been exacerbated by the unwinding of extended positioning in certain market segments such as momentum and tech stocks and is not necessarily a signal that US economic risks have escalated significantly." says the report.The tech-dominated Nasdaq composite index witnessed a 4 per cent fall, showing investors' sentiment. In the major losers, the AI fab company Nvidia lost about 5 per cent or USD 140 billion in a single day, while the stocks of Tesla declined about 15 per cent, and Apple plunged 4.85 per cent. Among the other major tech giants, Meta, which owns popular social media platforms such as Facebook, Instagram, and WhatsApp, lost USD 10 billion, down 4.42 per cent. Meanwhile, Microsoft, another major tech company, lost close to USD 380 billion, declining around 3 per cent. Amazon slides nearly 2 per cent while Alphabet, the parent company of Google, saw 4.49 per cent. The S&P index has now given up a nearly 8 per cent rally following Trump's re-election on 4 November, which had kindled hopes that business would benefit from deregulation and looser fiscal policy. The report added that despite the sharp market drop, other market segments remained stable, suggesting that the sell-off was largely due to the unwinding of tech and momentum stock positions rather than a fundamental economic crisis."We note that while the moves in the S&P 500 have been dramatic, swings in other market segments have been more muted. For example, the equalweighted version of the S&P 500 is flat for the year, the Russell 1000 value benchmark is up slightly, and high yield spreads have not widened very much," the report added. However, the report adds that the weaker consumer and business confidence, disappointing economic indicators, and concerns over a potential government shutdown and additional tariffs are adding to investor uncertainty.(ANI)
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