Market Watch: Momentum Stocks Lead Tech Selloff

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April 4 (Bloomberg) –- Jefferies Chief Market Strategist David Zervos discusses the tech selloff with Trish Regan, Julie Hyman, Alix Steel and Olivia Sterns on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)

Selloff since june 2012, just the worst selloff since this february.

The nasdaq if only having trouble with the momentum stocks, like google, amazon, netflix, down 3%, 4%, causing some to say these momentum players, these momentum stocks are really turning to take a turn and that could mean something for the overall market.

We want to get some additional context on the selloff.

We have alex and david and olivia sterns.

All hands on deck to handle this one.

I thought david made an interesting.

-- interesting point earlier.

It would have thought that we would have seen this negative reaction earlier.

We are looking for reasons.

This book is doubled over the past year.

Getting some perspective on these momentum stocks.

The biotech index is this outperformance of groups coming back.

One of the worst performing stocks, a very similar story there.

The earnings were actually very good.

Safe pricing and market share.

The quarter was good.

One of the things that people say could be a mini bubble is social media.

Some of these tech companies have really high valuation.

You have twitter, facebook -- what they are saying can justify themselves?

I think there has been a lot of talk about bubbles and i think that the story of tech, biotech, these really high momentum stories is a hard one for us to grab.

We don't know what the future brings but generally speaking, the future has been really good.

That is the optimism the fed was trying to create coming out of this crisis.

Hitting out of this animal spirit that drove growth for many decades.

These are seemingly helping certain sectors and certain parts of the economy.

You can say that the fed had a big role in that.

If we are to assume the fed is going to continue to be there and we can quote you earlier saying it was the most dovish speech you've ever heard, should we assume that the market is going to get better?

The tapering is all about handing the economy off to its own internal momentum.

I don't think we need the ever-expanding balance sheet.

Go back and look at the balance sheet expansion since 1913. it wasn't driving the dow jones industrial average since 1913. when the s&p was 600 and change back in 2009. i have been thinking about this all day.

Trying to -- the credit markets didn't really do much.

There is no sort of panic selling or the cusp of the names.

This looks like a rotation inequities, a lot of people with a lot of positions that are getting tested a little bit.

We have remained in a pretty tight range.

May be in the first quarter, change a few portfolios and maybe rethink the valuation.

We talked about the minutes in the earlier segment and the dots really threw us all for a loop.

Janet yellen giving us six months instead of nine to 12 months.

The market is till trying to figure out how this is going to happen.

The fed is tapering, they are taking away the wind behind the sales and hoping that there is wind out there that will continue to drive us.

I don't think everybody's is comfortable with that notion as maybe they would have been if it was still behind us.

It will take some time and i think we should see some -- we can see some gyrations on that.

People have called me up and said, this is it.

Qe doesn't work.

It they are going to take it away.

They are going to come back and do more.

They always have.

Certainly not when we are barely a percent or two off of the record high.

Jeremy siegel was on the other day and said, even if it is a bubble, these things tend to play out over time.

They thought interest-rate could stay below four percent for the next decade.

We will be in this very low growth environment and the fed will have to do everything it possibly can to try to get money out there.

The fed's long-run forecast is for present.

For the short-term interest rate.

-- four percent.

For the short-term interest rate.

By the time he gets to the peak, the trend below the rate will cycle the other way.

If that is the case, we have the end of 2016 forecast for the fed at 2.25%. that is pretty low in a world of three percent growth.

Janet told you that the glide path is going to be lower, the level of interest rates might be lower than what is necessary before.

Coming out of the worst recession since the great depression.

I don't think that is an unreasonable scenario.

What you always have to worry about is the inflation pickup that many people believe is working.

Even if it doesn't pick up.

There is that worry.

There is a lot of people that don't know how this unwind of $4 trillion and balance sheet -- it makes it a little jittery.

Keep going.

We will be right back.

We are talking about nothing but

This text has been automatically generated. It may not be 100% accurate.


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