Photo: Getty Images
Photo: Getty Images

Rocket Companies Stock Crashed Today

Rocket Companies (NYSE:RKT) plunged 33% after analysts warned that the stock had come too far, too fast.

Rocket's share price surged more than 70% on Tuesday in what appeared to be another Reddit-fueled short squeeze. Yet late last night, RBC Capital analyst Daniel Perlin cut his rating on Rocket's stock from outperform to sector perform and reiterated his $30 price forecast. That was 28% below where Rocket's stock closed yesterday.

Perlin argued that the risk-to-reward potential for investors was "now more balanced, if not skewed to the downside" following the stock's rapid ascent.

Analysts at JPMorgan went even further. "In light of the sharp rise in share prices, we believe fundamental investors should take profits," JPMorgan strategist Richard Shane said on Wednesday morning.

Many traders apparently took these analysts' comments as a reason to sell their shares today.

Many individual investors are taking part in coordinated buying campaigns on Reddit and other social media platforms. This is a dangerous game -- one that often ends in disaster.

These crowdsourced buying frenzies can certainly help to drive a stock's price sharply higher -- for a while -- as we've seen with GameStop and now Rocket Companies. But many of these traders will hype a stock to pump up its price -- and then dump it on unsuspecting investors when they eventually move on to their next target.

The worst part? Shareholders who buy later in these manipulated rallies and don't sell in time can suffer devastating losses.

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Stocks mixed, Nasdaq sheds more than 1% as tech rout extends further

The three major indexes traded mixed during the afternoon session, with the Nasdaq falling by more than 1% for a second straight session as tech shares lagged.

The energy, financials and industrials sectors – all cyclical sectors poised to benefit from a strengthening economic backdrop — outperformed in the S&P 500, and crude oil jumped above $61 per barrel. The information technology sector lagged in the blue-chip index.

Boeing, JPMorgan Chase and American Express led the Dow's 0.3% advance Wednesday afternoon. Shares of Salesforce, Microsoft and Johnson & Johnson each pulled back in afternoon trading.

Stock futures open flat after tech-led selloff

Stock futures traded flat Wednesday evening after another session of equity declines. Technology stocks came under more selling pressure as traders turned their focus to stocks poised to benefit from an impending economic reopening.

Contracts on the Nasdaq traded little changed, after the index dropped 2.7% during the regular session. Contracts on each of the Dow and S&P 500 also hugged the flat line.

The past several weeks have seen investors increasingly rotate away from the high-growth names that led the markets higher in 2020, given that a greater economic reopening appears imminent and apt to lift stocks badly beaten down last year. Still, however, a disappointing jobs report Wednesday morning – with private payrolls shown to have climbed less than expected in February — underscored the choppiness of the recovery, and the ground still left for the U.S. economy to make up post-pandemic.

Shares of Netflix, Peloton, and Zoom Plunged

Investors sold off stay-at-home stocks, following positive news on the COVID-19 vaccine front. By the close of trading, shares of Netflix (NASDAQ:NFLX), Peloton (NASDAQ:PTON), and Zoom Video Communications (NASDAQ:ZM) were down 5%, 8%, and 8%, respectively.

President Joe Biden said on Tuesday that the U.S. would have a sufficient supply of COVID-19 vaccines to inoculate every adult in the nation by the end of May. That's two months earlier than his previous projection.

Biden's accelerated timeline follows the U.S. Food and Drug Administration's decision to issue emergency use authorization to Johnson & Johnson for its single-shot coronavirus vaccine. J&J is working with its rival Merck to strengthen its manufacturing capabilities and accelerate the drug's rollout. "Extraordinary times take extraordinary efforts," J&J CEO Alex Gorsky said during an interview on CNBC yesterday.

Many investors took the news as a reason to sell stocks that have performed well during the coronavirus pandemic. This included so-called stay-at-home leaders Netflix, Peloton, and Zoom.

Photo: Netflix
Photo: Netflix

Tesla Stock Fell Sharply

Shares of Tesla (NASDAQ:TSLA) were hit hard. The stock fell 4.8% by the time the market closed.

The stock is likely down primarily because of a decline in the overall market that weighed particularly heavily on growth stocks like Tesla. However, shares may also be down because of a note from Morgan Stanley analyst Adam Jonas about Ford's new electric Mustang Mach-E taking market share from Tesla in February.

Jonas estimates that Tesla's market share of the EV market in the U.S. dropped from 81% in February of 2020 to 69% in February of 2021, largely due to market share gains from the new Mustang Mach-E.

Still, this doesn't mean Tesla's electric vehicle sales are faring poorly; the overall EV market grew 40% year over year during the period, Jonas estimates.

The main reason for the stock's decline, however, is likely a pullback in the overall market on Wednesday. The S&P 500 and Nasdaq Composite fell 1.3% and 2.7%, respectively. Many growth stocks like Tesla fell even more.

Tesla stock's decline adds to an overall downward trend for the stock in recent weeks. After shares rose to an all-time high of $900.40 earlier this year, the stock is now down 7% year to date, underperforming the S&P 500's 2% decline.

Investors should expect more volatility from Tesla shares, as growth stocks are typically much more volatile than the overall market.

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