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Wall Street sees a bright side in the “healthy” technology sale

NEW YORK (Reuters) – Some of Wall Street’s biggest players see the recent stock market technical manager as a bout of turbulence, not the beginning of a longer slide – and don’t see it as a reason to run for office.

FILE PHOTO: Street sign seen on New York’s New York Stock Exchange, February 10, 2009. REUTERS / Eric Thayer / File Photo

Invesco this week called the sharp decline in the Nasdaq a “healthy period of consolidation,” while the fund’s manager, Lord Abbott, said US stock valuations were probably deserved, based on an analysis of the companies’ profits.

On September 4, Goldman Sachs repeated its 3,600 end-of-year target for the S&P 500, which is approximately 6% above the close of the index on Wednesday, while UBS Global Wealth Management advised customers to “facilitate market entry” instead of staying away. .

Their optimism underscores how the Federal Reserve’s promise to keep interest rates at record lows and hopes of a COVID-19 vaccine breakthrough are at the heart of market gains this year, though many remain wary of US presidential elections and massive options betting. technology-related stocks could increase market volatility in the remaining months of 2020.

“What we think we’re experiencing is a healthy foam removal,” said Troy Gayeski, co-chief investment officer of SkyBridge, an alternative investment firm. “It simply came to our notice then. But if you are a technology investor, you had to understand that the ratings are very high. “

The Nasdaq posted its best day of April on Wednesday, the day after falling in correctional territory, usually defined as a drop of 10% or more from a recent peak. Other major indexes also recovered on Wednesday after a sharp decline.

“I think this way is not just a correction, but a grind,” Christina Hooper, Invesco’s chief global market strategist, said in a recent note.

Earnings for the S&P 500 for the second quarter were 23.1% above expectations, well above the five-year average of 4.7%, analysts at Lord Abbett said in a recent note.

“The inertia of profits and the size of analysts’ earnings revisions outpace those in other markets, suggesting they deserve higher valuations of US stocks,” the report said.

Still, some believe that more volatility persists. A recent survey of UBS Global Wealth Management investors showed that 65% see politics as their main concern, and the November 3 presidential election in the United States is only weeks away.

Prominent investor Stanley Druckenmiller – a skeptic of this year’s rally – sounded bearish again, warning on CNBC here that the stock market is in a frenzy fueled by the Federal Reserve.

Uncertainty when buying huge options from SoftBank Group Corp (9984.T) also hung over the markets, creating new risk.

Gaeski of Skybridge said he could see an opportunity to increase equity risk if there is a sharper decline, such as the Nasdaq, which falls 20% or the S&P 500 down 15% from their respective highs, and has other supporting signs. for the market as a further expansion of the Fed’s balance sheet.

Any sale that extends beyond the big stocks of technology that have brought markets up may be an indication that the withdrawal may expand further, said Willie Delwich, an investment strategist at Baird.

In the coming days, Delwiche is looking for signs of growing investor caution – such as buying put options, outflows of mutual funds and a declining upward view in surveys that show that oversupply has weakened.

Another indicator is how investors respond to key levels of technical support, said Keith Lerner, chief market strategist at Truist / SunTrust Advisory. The Nasdaq, for example, closed below its 50-day moving average for the first time since April on Tuesday, but returned above it on Wednesday.

“If you see that these markets are just crossing support levels, it’s a sign that sellers have the upper hand,” Lerner said.

Report by Louis Krauskopf; additional reporting by Megan Davis; editing by Ira Yosebashvili and Leslie Adler

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