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“Stocks only go up” was the philosophy, and however tongue-in-cheek the intent, it got a jarring refutation Thursday as the S&P 500 plunged 6% and almost $2 trillion was erased from equities. Selling was worst in areas of the market embraced by armies of retail investors that have swarmed to equities in the last month, including airlines, energy producers, and banks.
“Retail piled into this trade in a relatively major way,” said Mike Mullaney, director of global markets research at Boston Partners. “How are they feeling today? Crappy, really lousy. They’re questioning whether this is a sustainable move.” “There has been a disconnect between the market and how the economy is doing,” Giri Cherukuri, head trader and portfolio manager at Oakbrook Investments LLC in Lisle, Illinois, said by phone. “This is just a small pullback after a large gain. I don’t think it’s a buying opportunity yet. P/E is still very high.”
