After a massive rally, Wall Street suffered its worst day in almost three months as investors’ dumped the high-flying technology stocks. Concerns over lofty valuations also compelled investors’ to book profits. Deadlock over another financial-aid package, budget negotiations, and election uncertainty added to the chaos.
Though some data points indicate that the economy is gradually returning to pre-pandemic levels, it is still weaker by most measures. Millions of Americans remain out of work, and many industries such as travel, tourism and entertainment are struggling (read: Top-Ranked Mid-Cap ETFs Set to Defy September Curse).
As a result, the S&P 500 and the Nasdaq Composite Index suffered their worst one-day slump since Jun 11, falling 3.5% and 5%, respectively, while the Dow Jones Industrial Average logged in its worst one-day decline of 2.8% since Jun 26.
Dismal Zones
The hot and soaring technology segment went into a freefall with the S&P Information Technology sector tumbling 5.8% and snapping a 10-day winning streak. The sector also logged in its biggest one-day loss since March. Zoom Video Communications ZM — the hottest stock of the stay-at-home trend — plunged 10% on the day while Apple AAPL dropped 8%, marking its biggest one-day decline since Mar 16. Microsoft MSFT slid more than 6% while Alphabet GOOGL lost 5% in value. Amazon AMZN, Netflix NFLX and Facebook FB were both down nearly 4% each.
While all tech ETFs saw terrible trading, WisdomTree Cloud Computing Fund WCLD stole the show, tumbling 8.2%. Invesco DWA Healthcare Momentum ETF PTH, ARK Innovation ETF ARKK, iShares North American Tech-Multimedia Networking ETF IGN, Invesco Dynamic Networking ETF PXQ and First Trust Nasdaq Semiconductor ETF FTXL saw decline of at least 7% each.
The consumer discretionary and communications services sector also dropped with Invesco DWA Consumer Cyclicals Momentum ETF PEZ and Proshares Online Retail ETF ONLN shedding nearly 6% each. Alternative energy ETFs Invesco Solar ETF TAN and First Trust Nasdaq Clean Edge Green Energy Index Fund QCLN also dropped 7.7% and 7.2%, respectively (read: Cyclical ETFs to Gain on Vaccine Progress & Market Optimism).
Winning Zones
The CBOE Volatility Index (VIX), also known as the fear gauge, spiked as much as 26% to 33.45 — the highest reading in seven weeks. As a result, volatility ETFs outperformed in yesterday’s trading session with iPath Series B S&P 500 VIX Short-Term Futures ETN VXX and ProShares VIX Short-Term Futures ETF VIXY gaining more than 13% each.
Low-risk products gained as these provide some shelter during market turmoil. Cambria Tail Risk ETF TAIL and AGFiQ US Market Neutral Value Fund CHEP were up 1.6% each. AdvisorShares Dorsey Wright Short ETF DWSH and The Core Alternative ETF CCOR gained nearly 1% each.
The market sell-off has raised the appeal of the U.S. government bonds tracking the long end of the yield curve. PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF ZROZ, Schwab Long-Term U.S. Treasury ETF SCHQ, SPDR Portfolio Long-Term Treasury ETF SPTL, Vanguard Long-Term Government Bond ETF VGLT and iShares 20+ Year Treasury Bond ETF TLT were in the green with less than 1% gains (read: 10 Power-Packed ETFs to Buy for Second-Half 2020).
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