How Will Friday's Tech Share Sell-Off Affect the NASDAQ?

The NASDAQ (US-TECH 100) fell for a second week in a row after a $35 Billion tech stock sell-off on Friday. Several Chinese tech companies and other momentum stocks saw significant movement as the market closed, including Discovery and ViacomCBS, which experienced their greatest daily losses ever. It may be interesting for traders to watch on Monday how the market reacts. Despite the massive sell-off, the NASDAQ was up by 1.2% on Friday.

The NASDAQ index may still be hurting from the recent government efforts to improve the U.S. economy. Climbing treasury yields may be lowering the value of riskier tech stocks, although yields did come down last week from their previous spot the week before of more than 1.70. Even so, it is likely that the index wasn’t helped by the unexpected dump of $35 billion worth of stocks that took place just before the market closed on Friday afternoon.

Experts speculated that Friday’s sell-off may have been due to a possible margin call for Archegos Capital Management, which is run by Bill Hwang. Hwang was forced to close billions in orders on Friday when a number of positions went against him, because he had insufficient capital to meet his leverage requirements. Hwang already had a spotted past, as he had previously pleaded guilty to insider trading and was on a Goldman Sachs trading blacklist recently in 2018. He began his financial career in the 1990s as a “tiger cub” working for famed investor Julian Robertson’s Tiger Management.

However, Goldman Sachs later joined several other banks, including Morgan Stanley, and Credit Suisse, in lending Hwang billions of dollars to engage in highly leveraged trading. Some of the companies Hwang traded included Tencent (0700.HK), Baidu (BIDU), Discovery, and ViacomCBS all of which were part of the $10.5 billion worth of shares sold by Goldman Sachs on Friday. Morgan Stanley ended up selling $13 billion in shares, including Discovery and Baidu, while Archegos itself may have been forced to sell more than $20 billion in shares.

Discovery and ViacomCBS Stocks Hit Hard by Friday’s Sell-Off

While many of the stocks targeted in Friday’s block sale were able to recover before the end of trading on Friday, Discovery (DISCA) and ViacomCBS (VIAC) continued to trend down. This may be because media companies have yet to show how they can bounce back from the entertainment industry slump which set in after the pandemic began. On Friday, Discovery and ViacomCBS were both down by about 27%.

It remains to be seen whether the impacted companies will be able to reverse the negative trend.