(Bloomberg) -- As the selloff in global stocks intensified Monday, JPMorgan Chase & Co.’s trading desk said the rotation out of the technology sector might be “mostly done” and the market is “getting close” to a tactical opportunity to buy the dip.
The Nasdaq 100 Index fell as much as 5.45% following the 9:30 a.m. open in New York, after Japanese equities crashed the most in over a decade. Markets were extending last week’s declines, when a weak US jobs report ignited worries that the Federal Reserve isn’t moving fast enough to prevent a sharp downturn in the world’s biggest economy. A measure of volatility surged to the highest since 2020.
It’s a stark reversal from recent months, when technology shares were soaring as money flowed into high-flying shares like Nvidia Corp. and other AI favorites that were slumping Monday.
Buying of stocks by retail investors has slowed quickly, positioning by trend-following commodity trading advisers has fallen a lot across equity regions and hedge funds have been net sellers of US stocks, JPMorgan’s positioning intelligence team wrote in a Monday note to clients.
“Overall, we think we’re getting close to a tactical opportunity to buy-the-dip and our Tactical Positioning Monitor could dip further in the next few days,” wrote John Schlegel, JPMorgan’s head of positioning intelligence. “That said, whether we get a strong bounce or not could depend on future macro data.”
He pointed to economic figures such as ISM manufacturing, purchasing managers’ index data, the consumer price index and retail sales over the next couple weeks.
JPMorgan has seen signs that the rotation out of tech may be “mostly done,” the note said. “But it’s still hard to give the ‘all clear’ to tech specifically.”
Defensive stocks could benefit if the market remains weak, the note said. Stocks of utilities, a prime defensive sector, were among areas that outperformed the broader market last week.
(Updates trading)
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