What happened
Monday got off to an inauspicious start with the various stock market indexes falling anywhere from 2% to 3%. Tech stocks, which have soared this year, took it on the chin especially hard today.
As of 2:30 p.m. EDT shares of Pinterest (PINS -1.70%) are down 5.7%, Square (SQ -2.36%) has slipped 4.7%, and Slack Technologies (WORK) fell 4.2%. But why are they down?
Image source: Getty Images.
So what
This being earnings season, you might suspect that earnings would be the culprit -- and you might even be right, eventually. Of the three tech stocks named above, Pinterest will be the first to report earnings, with Q3 results slated to come out Wednesday. Square, however, doesn't report until next week, and Slack's numbers are even further out, with earnings not expected to arrive before December.
In the meantime, and in the absence of any other bad news to explain the stocks' respective slides, it would appear that we're seeing "baby with the bathwater" syndrome underway. With the markets broadly down today, the stocks with the most to lose are selling off harder than others. In the case of Pinterest, for example, the stock has more than doubled over the past year, and much of those profits could be put at risk if Wednesday's news doesn't measure up to expectations. Shareholders in Square -- up 180% in 52 weeks -- may have even more to lose next week.
Why, even Slack stock -- a relative underperformer with its 52-week gain of "only" 34% -- is still up more than twice the average S&P 500 stock this year. And those to whom a little less has been given may nonetheless fear having that taken away if today's stock market rout deepens.
Now what
What could cause that to happen? Well, begin with today's culprits:
Market pundits are pointing to continued logjams in Congress, which has yet to make progress getting a second big stimulus bill passed, as one reason stocks are under pressure today. Rising coronavirus infections are another concern. The U.S. recorded nearly 84,000 new COVID-19 cases Friday -- a new all-time high -- while in Europe, Spain and Italy are imposing curfews to restrain the virus's spread. Meanwhile, on the political stage, Election 2020 is scheduled to take place next week (perhaps you heard?). And investors may be worrying that a Democratic clean sweep of the White House, Senate, and House could usher in higher taxes and new regulations on business that could dampen growth.
That being said, consider that at least one of these fears (a stalemated Congress) could be cured by another (the hypothetical clean sweep). And as for the pandemic -- well, progress continues to be made on coronavirus vaccines and treatments. Eventually, even that problem will be licked, and today's sell-off, discouraging as it may be, could also prove to be short-lived.
