The Wall Street Journal Reports,"just one day after rallying sharply, U.S. stocks took an even steeper nose-dive, led by the Nasdaq Composite, which saw its worst one-day plunge in terms of both points and percentage since 2011.
We noted in this space just yesterday there was a chance that Wednesday’s rally was a dead-cat bounce, but even we didn’t think the subsequent selloff would come so quickly. By almost any measure of momentum this was a damaging slide. Biotech was hammered hard again, with the iShares Nasdaq Biotechnology ETF down more than 5% on the day, and about 20% off its highs. Several high-tech darling type stocks — Facebook, Netflix, Tesla, Twitter — also got smacked around".
Silicon Valley has been dining out for more than a year on Wall Street's bottomless appetite for growth stories. Like all feasts, though, the bill eventually comes due.
Recently, it has been the hip newcomers picking up the tab. The bruising stock selloff over the last month has targeted newer tech firms with cool terms like "cloud," "big data" and "social" in their business plans. Tech's old-timers, which have lagged behind the market over the last year despite actual profits and positive cash flow, have found themselves in favor once again.
How long "value" will be in vogue is the big question. Clues to the answer may be found in the IPO market.
The willingness of the public market to continue bestowing high valuations on young companies that often lack profits will offer the biggest clue as to whether the recent selloff is a blip or something bigger.
So investors should watch the IPO market closely. This has been frothy: The first three months of 2014 saw 64 companies raise $10.6 billion in the U.S., making it the busiest first quarter since 2000, according to Renaissance Capital.
The tech sector saw 15 deals, raising $2.4 billion, according to Dealogic, making it the best first quarter for the sector since 2004. Barely into the second quarter, another $2 billion has been raised already. And the pipeline is packed: 103 companies submitted their initial IPO filings during the first quarter.
