Another beating in tech shares has thrust the correction that began last month into a league of its own versus past selloffs.
The data is getting ugly. A gauge of 30-day turbulence in the Nasdaq 100 has tripled in five weeks, pushing it to the highest since 2011. Day-to-day swings are averaging 1.7 percent, half a percentage point more than in February. Prices for options protection in tech exceed the rest of the market by the most in seven years, using implied volatility on the Nasdaq and the S&P 500.
Home to Apple Inc., Facebook Inc. and Alphabet Inc., the Nasdaq 100 dropped 3 percent on Monday, extending its three-day decline past 5 percent and erasing the rally after Election Day. It’s the third time the index has tumbled from around the 7,200 level since early October amid doubts its stretched valuations are justified with its growth advantage fading.
“The rising volatility, the widening price swings reflect investors’ nervousness with respect to the story for tech, which appears to be changing,” said Alex Bellefleur, chief economist and strategist at Mackenzie Financial Corp. “There are the macro headwinds. Not only is the earnings growth priced to be lower from where it is, you’re also discounting the earnings at a higher interest rate. That adds to the anxiety.”
It’s getting risky to dip your toes back into the broad equity market when its biggest constituents — the ones that powered U.S. stocks to fresh highs earlier this year — are swinging so fiercely. The 30-session realized volatility of the NYFANG Index, which tracks the FANG quartet and other large tech stocks, hit an all-time high on Monday, and exceeds the fluctuations in the S&P 500 by the most on record.
Price swings in the broader Nasdaq 100 have been disconcerting. The 30-day realized volatility in the index of tech megacaps rose to 33.8, the highest since the market rout in September 2011.