Wall Street Has Its Worst Day in Months

But the system also amplifies downturns: Analysts said dealers rushed on Thursday to increase their bets on falling shares, which may have added momentum to the sell-off.

“I think today for tech stocks, you’re seeing that dynamic play out — you have a sell-off that is being chased by dealers,” said Yousef Abbasi, director of U.S. institutional equities at StoneX, a brokerage firm.

Tech shares have been a cornerstone in the recovery of financial markets since late March, when bond-buying programs by the Federal Reserve and lawmakers’ enactment of the largest economic rescue plan in U.S. history put a floor under collapsing financial markets.

Since then, the SP 500 is up more than 50 percent, erasing all of the losses seen during the chaotic days of February and March, when the index fell nearly 34 percent, putting a stake in the heart of what had been an 11-year bull run.

In recent months, the rally has gathered steam and broadened as investors have focused on flickers of life in the economy, including slightly better-than-expected corporate profits and continuing support from the Fed. There were also expectations that Congress and the White House would cobble together another stimulus package that sent more dollars to small businesses and households that remained imperiled by the economic downturn.

At the same time, many analysts have been warning that the stock market’s gains were becoming increasingly detached from reality. The outlooks for corporate profits and economic growth are far from rosy, and lawmakers in Washington have been unable to come to an agreement on another relief package.

Article source: https://www.nytimes.com/2020/09/03/business/stock-market-shares-covid.html