By Joyce Yu
Philadelphia, PA–U.S. stocks plunged for a second day as caution returned to markets following a remarkable start to a year that has pushed the stocks market to new highs. Most analysts see the pullback as temporary which could serve as a buying opportunity for cash rich investors.
Investors are evaluating whether stronger corporate earnings, acceleration in economic growth and optimism over U.S. tax cuts can continue driving up market valuations. “We’ve had a unilateral move higher [in stocks] to start things off and people are realizing this is not sustainable,” Art Hogan, chief market strategist at B. Riley FBR, told CNBC. “You’re also seeing some cracks in the global story with interest rates rising.”
Goldman Sachs Group Inc. predicts a correction is on the horizon, but says any such pullback would be a buying opportunity. Echoing the same view, Robert Pavlik, chief investment strategist at SlateStone Wealth, said he does not think this is the start of a major pullback. “I think people are looking for an excuse to sell,” he said. “This is the first wave of selling we’ve seen in a while.” Pavlik added this selling pressure could present a buying opportunity for investors who have cash on the sidelines.
It may not necessarily be a bad thing for the market to enter a long-overdue pullback, which some analysts believe would be a healthy cool down. U.S. stocks haven’t had a sizable pullback in a long time and volatility has been remarkably low.
Many analysts think if anything goes wrong it will start in bonds. Bond yield will rise sharply from their current historic lows if investors sell bonds. And risky stocks will start to look less attractive once investors can get better returns from bonds.
Healthcare companies were the worst performers on Tuesday after Amazon, J.P. Morgan Chase and Berkshire Hathaway announced plans to form a healthcare company aimed at cutting costs for their U.S. employees. UnitedHealth was the biggest decliner.
The independent company will initially focus on technology to provide “simplified, high-quality and transparent healthcare” at a “reasonable” cost for its more than 500,000 employees in the United States, the companies said.
Amazon has been eyeing on the pharmacy business and pharmacy distribution, according to numerous media reports. This move marks the official entrance to the healthcare industry by the tech giant, making investors in the healthcare sector nervous about potential competition and profit erosion.
