By Geoffrey Smith
Investing.com -- U.S. stock markets opened higher but quickly went into reverse on Friday, as a new wave of selling in overextended tech stocks swamped an attempted bounce.
By 10:40 AM ET (1410 GMT), the Nasdaq Composite, which bore the brunt of losses on Thursday, was down 244 points or 2.1%, after initially rising as much as 0.5%. The shift out of tech and into other, cheaper, cyclical stocks was still continuing: the Dow Jones Industrial Average rose 39 points, or 0.1%, to 28,292, while while the S&P 500 was down a relatively modest 0.9%.
The moves came after data showing the U.S. economy added 1.37 million jobs in August, roughly in line with forecast - albeit the headline number was flattered by hiring ahead of the 2020 census and masked a sharp increase in the number of permanent layoffs. Even so, private-sector hiring ran at over 1 million, more than twice the estimate of ADP (NASDAQ:ADP) in its monthly survey on Wednesday.
Tesla (NASDAQ:TSLA) stock fell another 4.4% after its 9% fall on Thursday, while Apple (NASDAQ:AAPL) stock fell another 3.4%, despite an initially positive opening.
Apple has now lost more than the total market value of companies as big as Exxon (NYSE:XOM), Merck or Intel (NASDAQ:INTC) this week, an illustration of how far out of kilter the gigacap tech stocks' valuation has gotten in a rally that has left the Nasdaq 25% above where it was at the start of the year.
The market remains in thrall to the army of retail traders who have driven the rally since March, despite signs of the froth coming off the most popular names.
"Retail option trading is off the charts," said Randy Frederick, VP for trading and derivatives with Charles Schwab (NYSE:SCHW) in Austin.
"Last week, aggregate open interest (total contracts outstanding) in equity options was +25% y/o/y; this week it is +31%," Frederick said via Twitter. "It must have seemed like easy money until yesterday. Caution still warranted today."
Other stocks coming off overbought levels included DocuSign (NASDAQ:DOCU), which was down 10.2%, and Zoom Video (NASDAQ:ZM), which fell 5.0%. Zoom stock was still up more than 23% for the week after posting exceptionally strong results for the three months through July.
After a little vacillation, the selling also filtered through to other risk assets, pushing U.S. Crude Oil Futures down by 1.2% to $40.29 a barrel.