As it turned in a decline of 1.07% on Monday, the Nasdaq composite had its worst day since 7/31. In the process, the index traded down to its lowest level since it broke out on 8/18.
With today's sell-off in the Nasdaq, a lot of US stocks (primarily in the small cap universe) were down sharply. Looking at the individual performance of Russell 3000 companies, there were 32 stocks in the index that fell more than 7.5% today alone. As shown in the table, a lot of those names were stocks that had been leading the market higher since the Nasdaq broke out on 8/18. For example, the average return of these 32 stocks since 8/18 through Friday (9/12) was a gain of 7.9%.
One of the highest profile names on this list is Tesla (TSLA), which dropped 9.1% for its worst day since May 8th. Interestingly, while TSLA was the 11th worst performing stock in the Russell 3000 today, Elon Musk's other company, SolarCity (SCTY), was right behind TSLA at number 12 with a decline of 9%. Is it us, or does it seem like even though the two companies are in completely different businesses, that whenever TSLA has a big up or down day that SCTY sees a similar move in the same direction?
Another way to illustrate how the market's leaders of the last few weeks dragged equities lower today is by grouping stocks in the index into deciles based on their performance from 8/18 through 9/12. In the chart below, we took each decile of stocks and then calculated the average return of the stocks in them. The biggest standout to the downside among the ten deciles is the group of stocks that performed best leading up to today, as they declined an average of 1.83%.
While investors were selling their biggest winners, they must have been offsetting the gains they took with losses from the biggest losers from 8/18 through 9/12. This group of stocks was down an average of 1.37% today, making it the second worst performing decile of the ten. Outside of those two deciles, returns were pretty similar today as seven of the remaining eight deciles had average returns that were within a range of 30 bps.