The stock market has witnessed an impressive run so far this year. The Nasdaq Composite (IXIC), S&P 500 (GSPC) and Dow Jones Industrial Average (DJI) have gained 20.4%, 12.4% and 14%, respectively, year to date.
The market added to its winning streak yesterday with another round of all-time highs from these three major U.S. equity gauges on strong economic reports.
So, as they continue with their impressive run in the market, there are at least three good reasons why a pullback appears to be around the corner.
Factors that Could Trigger a Pullback
The Fed has started reducing its balance and it’s worth noting that this event has had an adverse impact in the past. KM Partners data shows that five out of six times the Fed has made efforts to reduce its balance sheet; it has resulted in a recession.
So, this sentiment can lead to market volatility going forward especially if the Fed takes up a hawkish approach. As of now, the Fed is taking it easy and therefore chances of market disruption are low.
Heightened tensions between the United States and North Korea can also cause stocks to fall. Though a full-fledged war is unlikely, investors would surely prefer to move out of equities and place their hard-earned money in safer products.
Another major trigger could be the growing threat of cyberattacks. After global ransomwares WannaCry and Petya that affected 150 and 65 countries respectively, hackers breached the data of credit agency Equifax, affecting 143 million Americans. That’s close to half of the US population.
So, the threat of exchange data been hacked and a market collapse must have started to concern investors.
Is a Correction Due?
Well, we have got mixed views on that. For example, while the Goldman Sachs Bear Market Indicator continues to rise, economists opine that the current accommodative monetary policy environment will prevent equity markets from turning bearish.
Again, while Wall Street analysts indicated “extreme bullishness” on stocks at the end of September, based on a monthly survey by Bank of America Merrill Lynch (BAML), BAML itself says that it’s historically been a bearish signal when Wall Street is extremely bullish.
Stocks to Steer Clear Of
While there are arguments in favor of both bullish and bearish trends, it remains to be seen in which direction the market moves. We highlight four technology stocks which are better avoided if the market retreats from the recent highs.
Cabot Microelectronics Corp. CCMP supplies polishing slurries and pads used in the manufacture of integrated circuit (IC) devices within the semiconductor industry, in a process called chemical mechanical planarization (CMP).The stock has a Momentum Score of F and has a Zacks Rank #4 (Sell).
Cabot Microelectronics Corporation Price and EPS Surprise
Cabot Microelectronics Corporation Price and EPS Surprise | Cabot Microelectronics Corporation Quote
SITO Mobile, Ltd. SITO is a technology-based mobile solutions provider. It offers mobile location-based advertising and mobile messaging platforms that enable brands, agencies, and retailers to transform digital marketing by delivering targeted mobile advertising campaigns based on geo-location, in-store traffic, and customer response. The stock has a Momentum Score of D and has a Zacks Rank #5 (Strong Sell).
SITO Mobile, Ltd. Price and EPS Surprise
SITO Mobile, Ltd. Price and EPS Surprise | SITO Mobile, Ltd. Quote
Exa Corporation EXA develops, markets, sells and supports software products, and provides professional services for simulation-driven design. The company offers PowerFLOW simulation engine, automatic fluid grid generation engine, mesh preparation, advanced simulation analysis and rapid design geometry modification products. The stock has a Momentum Score of C and carries a Zacks Rank #4.
Exa Corporation Price and EPS Surprise
Exa Corporation Price and EPS Surprise | Exa Corporation Quote
Virtusa Corp. VRTU operates as an information technology (IT) services company. It offers business and IT consulting, application outsourcing, digital transformation and innovation; operational excellence; and transformational services and solutions to communications and technology; banking, financial services and insurance; and media and information industries worldwide. The stock has a Momentum Score of C and carries a Zacks Rank #4.
Virtusa Corporation Price and EPS Surprise
Virtusa Corporation Price and EPS Surprise | Virtusa Corporation Quote
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here .
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.