But the market is due for a bounce, according to the WOLF STREET dictum “Nothing Goes to Heck in a Straight Line.”
By Wolf Richter for WOLF STREET.
Monday would be a good start for a bounce. It can also start on Tuesday or in November or whenever. And maybe not much of a bounce. But the market is due for a bounce after what it went through in September, or actually since August 16, which was the end of the bear-market rally.
The ugly demise of this bear-market rally adds eerie parallels to the dotcom bust, which was also punctuated by a rally in the summer of 2000, when the Nasdaq Composite rallied 33% without returning to its previous high, and then eventually falling 78%, from which it did not fully recover until 15 years later, in July 2015, after the Fed dumped trillions of dollars into the market with QE. But then, inflation was below the Fed’s target. Now inflation is raging well above Fed target.
So since the end of this summer’s bear-market rally on August 16, the S&P 500 Index is down 16.7% and the Nasdaq is down 19.5%, both of them barely above February levels 2020.
Many of the stocks on my Imploded Stocks list have fallen 50% or more over the same period, to carve new lows after rising 100% in recent weeks – such as Carvana [CVNA] which went from $20 on July 14, to $54.59 on August 16, and back to $20.30 on Friday, September 30. Up 170% in five weeks, and gave it all away in the next six weeks. Carvana is down 95% from its intraday high on August 10, 2021.
This market is still that crazy, and that’s why the bottom is nowhere in sight, and there’s no complete surrender, but stocks are due for a bounce.
In September, the S&P 500 Index fell 9.3%, the worst monthly decline since March 2020, and the worst September since the dotcom bust.
Every sector broke in September, even energy. Health care scored the lowest (-2.6%). The sectors that were hit the hardest in September were: Information technology (-12.0%), Communication Services (-12.1%), and Real Estate (-13.1%).
Year-to-date, Energy was the only sector to rise (+34.9%), even though the sector was down 9.3% in September, according to S&P Dow Jones Indices.
In further eerie parallels to the dotcom bust, year-to-date: The two tech-related sectors – Communication Services and Information Technology – fell 31% and 39%. And some of the Big Tech stocks have fallen more than that from their respective highs; more in a moment.
| S&P 500 Index Sectors | September | YTD |
| Energy | -9.3% | 34.9% |
| Utilities | -11.3% | -6.5% |
| Consumer Staples | -8.0% | -11.8% |
| Taking care of your health | -2.6% | -13.1% |
| Industrial | -10.5% | -20.7% |
| Financial | -7.8% | -21.3% |
| Materials | -9.4% | -23.7% |
| Real estate | -13.2% | -28.9% |
| Consumer Discretionary | -8.1% | -29.9% |
| Information Technology | -12.0% | -31.4% |
| Communication Services | -12.2% | -39.0% |
But it’s worse compared to their respective highs:
The S&P 500 Index closed Friday at 3,586, down 25.6% from its intraday high on January 3, and where it first hit in November 2020.
The Russell 2000, which tracks small-cap stocks, is down 31.8% from its peak on November 5, retaining its function as an early warning signal.
The Nasdaq closed at 10,576, down 34.8% from its intraday high on Nov. 22, the same day Microsoft CEO Satya Nadella dumped 50.2% of his Microsoft stock in a bunch of crazy trades, totaling $285 million . On the list of best-time insider trades ever, he should be at the very top. Since then, Microsoft shares have fallen 33.4%, to $232.90, the lowest closing price since March 2021.
The Big “Tech” plunge from recent highs.
But Microsoft is the second best performing stock of the cadre of Big Tech stocks. Apple was the best performer, down “only” 24.5% from its peak at the start of January 2022.
The worst performing Big Tech stocks were Meta, Netflix, and Nvidia, all of which were down nearly 65% from their respective highs. This is a huge sell-off for big companies.
Two of those companies – Cisco and Intel – rose to prominence 22 years ago; Cisco is down 51% and Intel 65% from that peak 22 years ago.
The “from high” drops shown in the table are the drops from recent highs.
| “Tech” giants. | $, Sep 30 | From above | Date of high | |
| Apple | [AAPL] | 138.20 | -24.5% | 01/2022 |
| Microsoft | [MSFT] | 232.90 | -33.4% | 11/2021 |
| Tesla | [TSLA] | 265.25 | -36.0% | 11/2021 |
| Alphabet | [GOOG] | 96.15 | -36.8% | 02/2022 |
| Amazon | [AMZN] | 113.00 | -40.1% | 07/2021 |
| Cisco | [CSCO] | 40.00 | -37.8% | 12-2021 |
| Salesforce | [CRM] | 143.84 | -53.9% | 11/2021 |
| Adobe | [ADBE] | 275.20 | -60.7% | 11/2021 |
| Intel | [INTC] | 25.77 | -62.3% | 04/2021 |
| Meta | [META] | 135.68 | -64.7% | 09/2021 |
| Nvidia | [NVDA] | 121.39 | -65.0% | 11/2021 |
| Netflix | [NFLX] | 235.44 | -66.4% | 11/2021 |
Big Tech stocks are now back where they first went in…
- Apple: January 2021.
- Microsoft: January 2021.
- Tesla: January 2021.
- Alphabet: January 2021.
- Amazon: April 2020.
- Cisco: November 1999. Peaked in March 2000 at $82 and spent 22 years down 51%, nightmare-come-true for tech-stock buy-and-holders.
- Salesforce: July 2018.
- Adobe: September 2018
- Intel: 1998. Peaked during the infamous bear-market rally in 2000 at $75 and spent 22 years down 65% – even bigger tech-stock buy-and-holder nightmare-come-come- true.
- Target: January 2017.
- Nvidia: August 2020
- Netflix: April 2018
When a bubble like this breaks, it can be brutal. As Cisco and Intel show, some stocks may “never” recover from their bubble highs — “never” meaning either “never” or just beyond a reasonable time frame for long-term investors. During the dotcom bust years and the years that followed, hundreds of stocks were lost, either to zero or bought for a few bucks a share. We only remember the winners who came out of the dotcom bust and thrived, like Amazon. But Amazon is a rare exception.
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