The Fearless Girl statue stands in front of the New York Stock Exchange (NYSE) on Wall Street on June 29, 2020 in New York City.
Angela Weiss | AFP | Getty Images
Stock futures rose in night trading on Monday after technology stocks suffered their worst sell-off in more than five months.
The futures on the Dow Jones Industrial Average gained 220 points, while the S&P 500 futures rose 0.5%. The Nasdaq 100 futures were flat.
After a major reversal in big tech stocks last week, stocks have just finished a five-week winning streak. Heavy losses at Amazon, Apple, Microsoft and Facebook – the market leaders of 2020 – caused the tech-heavy Nasdaq Composite to fall 3.3% and suffer its worst week since March 20. The Dow and S&P 500 fell 1.8% and 2.3% respectively last week, recording their biggest weekly losses since June.
Many on Wall Street believe the weakness stems from concerns that the massive tech ramp-up has pushed valuations to unsustainable levels. Aggressive buying of growth stocks has also had an impact on options markets. Even with last week's retreat, the Nasdaq is up more than 70% from its March low.
"Given how extreme many of the indicators we are following have gotten earlier this week, we believe it will take more than a slight decline to improve these conditions," said Matt Maley, chief market strategist at Miller Tobacco, in a note on Sunday. "We therefore believe a correction of more than 10% is likely."
Maley pointed out the extremely overbought conditions in some of the megacap tech names, as well as the increased rating levels for the S&P 500.
Big tech's slump last week coincided with outperformance in cyclical stocks – names most sensitive to the economic rebound. The S&P 500 materials and finance sectors were the two biggest winners from the previous week, up 2.3% and 0.9%, respectively.
Amid the big rotation, the Cboe Volatility Index, known as the VIX or "market fear measure", hit a high of 38.28 on Friday, its highest level since June 15.
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