In 20 of the last 26 trading sessions, the Nasdaq 100 index has seen price swings of 1% or more in either direction, with the 1.1% upmove on Tuesday being the latest. Wednesday could have been one more addition to the list, but the index recovered from the lows to end 0.3% lower.
Such sharp moves have only taken place on four previous instances since the turn of the millennium – the Covid shock of 2020, the bear market of 2022, the global financial crisis of 2008, and the bust of the dotcom bubble in 2000. Some cautious analysts are drawing a similar parallel to the ongoing Artificial Intelligence boom.
Dave Lutz of Jonestrading Institutional Services LLC attributed these moves to quants and factors as he observed an unusual number of active investor accounts sitting on the sidelines awaiting more clarity from corporate earnings, interest rate outlook and developments from West Asia that have recently sparked a flare up in the oil prices yet again.
Semiconductor and chip stocks have been in the headlines all through the year. The VanEck Semiconductor ETF and the iShares Expanded Tech-software ETF have seen at least 30 moves of 4% or more in either direction this year so far, more than those seen by both across the last seven years, according to Lutz.
The volatility is turning out to be reversal trend from the first half of the year, as only 10 stocks on the Nasdaq 100 had powered the 20% rally seen by the index. Micron, AMD, Intel were among the lead contributors to this move, particularly during the April-June period.
Analysts also cite this volatility to a rotation seen between these semiconductor companies, whose rally in the first half had led to a collapse in software-led names, from which they have still not recovered.
A similar trend was observed by BTIG Chief Market Technician Jonathan Krinsky, who observed the Philadelphia Semiconductor Index (SOX) had seen at least 15 up or down moves of at least 3% in the last 30 days, a streak last seen in 2000.
“There have been an increasing number of warning signals over the last month, many of them rhyming with the March 2000 peak,” he wrote in a note. He called the the SOX’s swings an “ominous” signal.
(With Inputs From Agencies.)
