Futures bounce after tech rout sends Nasdaq into
correction
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[September 09, 2020] By
Medha Singh and Devik Jain
(Reuters) - U.S. stock index futures jumped
on Wednesday following a brutal sell-off in heavyweight technology
stocks that sent the Nasdaq Composite index into correction territory in
just three sessions.
Tesla Inc <TSLA.O> climbed 4.4% in premarket trading after shedding
about $80 billion of its market capitalization in the previous session
following its surprise exclusion from the S&P 500.
Apple Inc <AAPL.O>, Salesforce.com Inc <CRM.N> and Microsoft Corp <MSFT.O>,
which have borne the brunt of the tech rout, led gains among the Dow
Jones Industrials' 30 components.
"You went from being very, very overbought to now being more like evenly
balanced," said Andrea Cicione, head of strategy at TS Lombard in
London.
![](http://archives.lincolndailynews.com/2020/Sep/09/images/ads/current/humanesociety_sda022411.png)
The tech-heavy Nasdaq <.IXIC> tumbled 4.1% on Tuesday, bringing total
losses since Sept. 2 to 10%, with declines also led by stocks such as
Amazon.com Inc <AMZN.O>, Facebook Inc <FB.O> and Netflix Inc <NFLX.O>
after a rally dominated by the so-called "stay-at-home" winners.
The correction has been partly driven by worries that sellers of call
options would unwind massive amounts of stocks that they bought during
the run up in U.S. stocks as hedges.
Media reports said SoftBank Group Inc <9984.T> has made big bets on
equity derivatives tied to tech firms, while retail investors paid $40
billion of premium on call options in the past month, according to OCC
data.
In signs of growing unease about the positioning in tech stocks, a
measure of demand for protective put options in relation to call
options, used to bet on upside, has risen sharply.
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The front facade of the New York Stock Exchange (NYSE) is seen in
New York City, New York, U.S., June 26, 2020. REUTERS/Brendan
McDermid
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Still, analysts said they did not expect a prolonged sell-off in U.S. stocks
against the backdrop of an easy monetary policy by the Federal Reserve.
Later this week, the U.S. Senate also aims to vote on a drastically scaled-back
Republican coronavirus aid bill, despite opposition from Democrats who are
needed for any measure to be enacted into law.
At 7:15 a.m. ET, Nasdaq 100 e-minis <NQcv1> were up 136.5 points, or 1.23%, Dow
e-minis <1YMcv1> were up 68 points, or 0.25%, and S&P 500 e-minis <EScv1> were
up 15.75 points, or 0.47%.
Wall Street's fear gauge <.VIX> slipped further away from near three-month highs
as stock markets also shrugged off news about AstraZeneca <AZN.L> pausing global
trials of its experimental COVID-19 vaccine after an unexplained illness in a
participant.
Volatility is expected to rise in the run-up to Nov. 3 U.S. presidential
elections, with September and October also historically the most volatile
two-month stretch of the year.
Lululemon Athletica Inc <LULU.O> dropped 5.2% after the yogawear maker forecast
a drop in current-quarter adjusted profit due to higher marketing expenses.
Tiffany & Co <TIF.N> tumbled 8.9% after French luxury goods giant LVMH <LVMH.PA>
warned it was set to walk away from its planned takeover of the U.S. jeweler due
to complications arising over the deal.
(Reporting by Medha Singh and Devik Jain in Bengaluru; Editing by Sagarika
Jaisinghani and Shounak Dasgupta)
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