Wall Street isn’t done selling some of its favorite stocks this week.
The S&P 500 fell 1% on Wednesday, while the Nasdaq Composite dropped 1.7%. The Dow Jones Industrial Average fell 125 points, or 0.3%.
Did the Dow once again get too close to its Dec. 4 record close and trigger a selloff? Probably not. Instead, traders who aren’t on vacation through Labor Day have opted to sell some of this year’s biggest winners and buy into laggards offering lower volatility and higher dividends.
ETFs focused on such strategies were rallying. On the flip side, the Invesco S&P 500 High Beta ETF, up more than 16% this year, was down 1.9%; The Invesco QQQ Trust Series I was down 1.6%; The iShares Russell 1000 Growth ETF was down 1.6%, followed closely by the Invesco S&P 500 Momentum ETF and the Invesco Pure Growth ETF with declines of 1.4%.
Even the all-stars of the bull market run were getting crushed. The Roundhill Magnificent Seven ETF was down 2.2%, with six of the seven members down more than 1%; Tesla and Nvidia were down more than 3%, while Amazon.com, Meta Platforms, and Alphabet were down more than 2%; Apple was down 1.6%; Microsoft was down 0.5%.
“Looking at the NASDAQ Composite, I think this pullback is expected at this stage,” Frank Cappelleri, founder of technical analysis firm CappThesis, tells Barron’s. “If you look at the price action since the end of April, the drawdowns have been exceptionally shallow—especially for a technology-heavy, broad index like this.”
It may not be a full-blown rotation, but traders are clearly looking at the end of August and start of September—historically a tougher stretch for the year’s winning strategies—and the potential for economic data to put a dent in this year’s rally as reason enough to sell now and ask questions later.