Tech sell off was a ‘head fake’ as stocks rebound, say analysts

Bank review, current USBR score and consumer report

Tech investors have been whipsawed the past few weeks. But things appeared to be looking up on Monday.

The tech-heavy Nasdaq hit a new high on Sept. 2, then quickly posted a record speed correction, dropping roughly 4% over the past week on worries of overly exuberant options trading and overheated valuations. But in late afternoon trading Monday, the index rallied roughly 2% as investors move on from the past week’s rout.

Big names like Tesla and Apple, which dragged the sector down last week, posted strong rallies, up 3% and 12% respectively as of Monday’s close.

According to Lisa Shalett, Morgan Stanley Wealth Management’s chief investment officer, “last week’s 7% technology sell-off was technical in nature and not sufficient to break market leadership trends that have favored long duration secular growth names,” she wrote in a note Monday.

Meanwhile, analysts at Goldman Sachs and Deutsche Bank wrote in notes Friday that the early September sell-off is likely short-lived, predicting stocks will likely continue their trek higher in coming months.

From a technical standpoint, Wells Fargo Investment Institute’s Sameer Samana points out the S&P 500 and Nasdaq “both were able to hold above the levels we saw in June. From a higher highs, higher lows standpoint, … the fact you were able to hold at higher levels than June or July is encouraging,” he tells Fortune. “Right away, it tells a lot of investors, ‘Nothing is wrong with the trend, we just got a blowoff and kind of a pullback’.” In fact, Samana points out the sector is still essentially trading at levels hit in mid-August.

And to some bullish investors, the rally Monday may be the all-clear that markets were merely frenzied, not in trouble.

“As far as the rebound in tech, you need to look back to last week, which was basically more of a head fake more than anything,” Peter Essele, the head of portfolio management at Commonwealth Financial Network, tells Fortune. “It was a resetting of expectations, a resetting of valuations, it was not fundamentally-driven, and I think after that slight downturn, that slight selloff, investors are starting to realize just how much of a solid footing the economy and markets are really on.” He believes much of the rally on Monday is from investors moving back in and snapping up tech names that have “seen pretty significant appreciation” over the past six to 12 months and are “basically on sale” from levels a few weeks ago.

And for Samana, the “absorption” of 10-year and 30-year Treasury issuances last week that quelled fears of higher interest rates “followed by a good bit of M&A over the weekend, which shows confidence on the part of CEOs, and some easing in financial conditions like the volatility indices [and] the dollar” are all bigger macro reasons why markets are climbing higher Monday. “All are helping sentiment on the day and leading to a rebound from the volatility over the past week or two,” he notes.

And as Fortune reported last week, there are still bullish signs indicating where tech stocks may go from here.

More must-read finance coverage from Fortune:

11 Things You Should Know Before You Get Your First Credit Card

A credit card may seem like just another tool to help you make purchases, but it can be much more. When used responsibly, a credit card can help you build

What Is a Balance Transfer, and Should I Consider Doing One?

In a perfect world, no one would carry a balance on their credit card. We would all pay our bills in full each month and never have to worry about

How Is Credit Card Interest Calculated?

So your bank tells you that your credit card has a 15% APR. What does that actually mean? How does your bank calculate your interest rate, and how does that translate into how much you actually pay? …

What Is a Balance Transfer, and Should I Consider Doing One?

In a perfect world, no one would carry a balance on their credit card. We would all pay our bills in full each month and never have to worry about

Subscribe to our e-mail list and stay up-to-date with all our news.

The US Bank Review is an independent authority and bank watchdog group monitoring financial institutions operating the in United States. We have no affiliation with any banks featured, reviewed or profiled. All rights reserved. Terms of use and Privacy Policy