Major tech stocks plunge with eerie parallels to Dotcom bust: -25% to -66% from highs so far

But the market is headed for a bounce, according to the WOLF STREET poem that “Nothing goes to hell 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 anytime. And maybe not much of a bounce. But the market is headed for a bounce after what it has been through in September, or indeed since August 16, which was the end of the bear market rally.

The ugly demise of this bear market rally heightens the 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 peak, before finally collapsing 78% , which it would not fully recover from until 1[ads1]5 years later, in July 2015, after the Fed had dumped trillions of dollars into the market with QE. But at the time, inflation was well below the Fed’s target. Now inflation is raging well over Fed’s goal.

So since the end of this summer’s bear market rally on August 16, the S&P 500 has fallen 16.7% and the Nasdaq has fallen 19.5%, both barely above February 2020 levels.

Many of the stocks on my list of imploded stocks have plunged 50% or more in the same period, to make new lows after shooting up 100% over the previous weeks – like Carvana [CVNA] which went back from $20 on July 14th to $54.59 on August 16th and back to $20.30 on Friday the 30th. September. Up 170% in five weeks, then gave it all up in the following six weeks. Carvana is down 95% from its intraday high on August 10, 2021.

That’s how crazy this market remains and that’s why the bottom is nowhere in sight and there’s absolutely no capitulation, but stocks are on the way to a bounce.

In September, the S&P 500 index fell 9.3%, the worst monthly drop since March 2020, and the worst September since the dotcom bust.

Every sector was beaten in September, even energy. The healthcare sector was the least affected (-2.6%). The sectors that were hit the most in September were: Information technology (-12.0%), communication services (-12.1%) and property (-13.1%).

Year-to-date, energy was the only sector to gain (+34.9%), although the sector fell 9.3% in September, according to S&P Dow Jones Indices.

In further eerie parallels to the dotcom bust, so far this year: The two technology-related sectors — communications services and information technology — have plunged 31% and 39%. And several of the Big Tech stocks have plunged far more than that from their respective peaks; more in a moment.

S&P 500 Index Sectors September YTD
Energy -9.3% 34.9%
Tool -11.3% -6.5%
Consumer staples -8.0% -11.8%
Health Service -2.6% -13.1%
Industry -10.5% -20.7%
Economy -7.8% -21.3%
Materials -9.4% -23.7%
Property -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 tops:

The S&P 500 closed Friday at 3,586, down 25.6% from its intraday high on Jan. 3, and where it had first been in November 2020.

The Russell 2000, which tracks small-cap stocks, is down 31.8% from its Nov. 5 peak, thus maintaining its function as an early warning signal.

The Nasdaq closed at 10,576, down 34.8% from its Nov. 22 intraday high, the same day Microsoft CEO Satya Nadella dumped 50.2% of his Microsoft stock in a flurry of frenzied trades totaling $285 million . On the list of best-timed insider trades ever, he has to be right at the top. Since then, Microsoft shares have fallen 33.4% to $232.90, the lowest closing price since March 2021.

The big “Tech” dive from the last highlights.

But Microsoft is the second best performing stock in the group of Big Tech stocks. Apple is the best performer, down “just” 24.5% from its early January 2022 high.

The worst performing Big Tech stocks are Meta, Netflix and Nvidia, all down around 65% from their respective highs. These are massive sales for large companies.

Two of these companies — Cisco and Intel — had peaked 22 years ago; Cisco is down 51% and Intel 65% from its peak 22 years ago.

The falls “from high” shown in the table are falls from the most recent highs.

“Tech” giants $, September 30 From high Date too 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 had been in the first…

  • 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 has spent 22 years falling 51%, nightmare come true for tech stock buys and owners.
  • Salesforce: July 2018.
  • Adobe: September 2018
  • Intel: 1998. Peaked during the infamous 2000 bear market rally at $75 and has spent 22 years falling 65% – even bigger tech stock buy-and-hold nightmares come true.
  • Meta: January 2017.
  • Nvidia: August 2020
  • Netflix: April 2018

When a bubble like this breaks, it can get brutal. As Cisco and Intel show, some of the stocks may “never” recover to their bubble heights — “never” either means “never” or just beyond a reasonable time frame for long-term investors. During the years of the dotcom bust and the years that followed, hundreds of stocks disappeared, either going to zero or being bought for a few dollars a share. We just remember that the winners come out of the dotcom bust and thrive, like Amazon. But Amazon was a rare exception.

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Major tech stocks plunge with eerie parallels to Dotcom bust: -25% to -66% from highs so far

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