It began with energy stocks in intensive care but now the selloff pushing the Standard & Poor’s 500 Index toward its low from August is being driven by industries that nobody thought were sick.
Banks plunged 2.6 percent Wednesday to the lowest since May 2014 while technology companies extended their 2016 decline to 7.9 percent. Exchange-traded funds tracking the industries, ostensibly insulated from the rout in oil, saw cash yanked in six of the last seven days, with the amount of money fleeing tech stocks hitting a one-year high.
Nothing’s safe as investors who piled in are suddenly retreating and nobody’s around to buy the dip, said Michael Antonelli, an institutional equity sales trader and managing director at Robert W. Baird & Co. in Milwaukee. “These are the crowded longs that are being puked out.”
The S&P 500 tumbled 2.5 percent at Wednesday, bringing the loss this year to 7.5 percent, while futures were little changed at 7:31 a.m. New York time Thursday. The benchmark index is down 11 percent from its all-time high set in May. Energy and materials shares have borne the brunt of that selloff, though now past-high fliers have taken over, with health-care and consumer-discretionary shares joining the beatdown.
A week before its earnings report, Morgan Stanley fell to a two-year low, plunging 5.5 percent in its biggest drop since the August correction. Legg Mason Inc., the global asset manager which oversees about $672 billion, reached the lowest level since October 2013.
Activision Blizzard Inc. was among the worst performers in the S&P 500 technology sector, sliding 6.1 percent. It was a far cry from the video game maker’s 2015, when it led the industry with a 92 percent gain. Semiconductor companies Skyworks Solutions Inc., Micron Technology Inc. and Avago Technologies Ltd all fell more than 5 percent Wednesday.
The latest rout has hallmarks of a shift in investor sentiment akin to a bear market, Antonelli said. “The bull market, it may not be over today, but it certainly has its finish line in sight.”
Four of the 10 main industries in the S&P 500 have slipped beneath their August lows. Financial firms have plunged 9 percent this year, including their worst weekly performance since 2011, and now trade 2.2 percent lower than where they were at the end of the selloff five months ago. Health-care shares fell past their summer troughs after a 2.9 percent rout Wednesday.
“Any perceived benefit to banks from higher interest rates has been swamped by renewed concerns about a slowdown in global growth,” Antonelli said.
As markets tumbled in summer, technology and financial stocks were the biggest decliners after only energy, as defensive groups held up better. That’s happening again. Commodity producers, the hardest hit, extended their declines since August to at least 4.6 percent, while utility shares ended the day little changed.
Whether it’s fund managers or algorithms battering stocks, it could get worse, said Steve Wruble, chief investment officer who oversees about $700 million at Portland, Oregon-based RiskX Investments. “Some of the market’s leaders have been pulling back. Now we’re into earnings season so it’s itchy trigger fingers.”
Technology and financials had outperformed the broader index during the first six years of the bull market, with gains of more than 260 percent compared with the S&P 500’s 215 percent advance. The two groups also are expected to deliver earnings this year in line or above the forecast for the overall index. JPMorgan Chase & Co. is slated to report results Thursday before U.S. markets open.
In addition to the slump in oil prices -- Brent crude fell below $30 a barrel for the first time since 2004 on Wednesday, U.S. oil is at a 12-year low -- there’s growing apprehension about profit growth, said David Sowerby, a money manager at Loomis Sayles & Co., which oversees about $230 billion. “In 2016, there’s not many places to hide out.”
“If you started the year with consumer discretionary and materials down, to me, that’s pain,” Sowerby said. “It’s more universal pain when consumer, tech, financials and energy are all down to what I would consider a material amount for the first week and a half of the new year.”
--With assistance from Lu Wang.
To contact the reporters on this story: Anna-Louise Jackson in New York at ajackson36@bloomberg.net; Dani Burger in New York at dburger7@bloomberg.net To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net Chris Nagi
