Morgan Stanley Says 'Mag 7' Stocks Are a Good Buy After Market Drop
- Morgan Stanley suggests that the recent drop in technology stocks presents a buying opportunity.
- The 'Mag 7' stocks, referring to major technology companies, were affected by a significant sell-off.
- Investors may consider this as a chance to purchase shares at lower prices.
On August 7, 2024, U.S. stock markets faced a challenging day as a morning rally lost momentum, primarily due to significant sell-offs in major technology stocks. Nvidia led the decline, closing down 5.1%, followed by Tesla at 4.4%, Meta Platforms at 1.1%, and Microsoft at 0.3%. The Nasdaq Composite ended the day down 1.1% at 16,195.81, with both the Dow Jones Industrial Average and the S&P 500 also closing lower. Analysts at Morgan Stanley suggest that the recent downturn in technology stocks, particularly the so-called "Magnificent Seven," could present a buying opportunity if the U.S. economy avoids a recession. Erik Woodring, an analyst at the firm, noted that current valuations for these stocks are approximately 30% below their five-year highs and 50% above their lows, aligning with historical averages. However, when factoring in future earnings growth, these stocks are trading at a 40% discount. Despite the potential for recovery, the Magnificent Seven have seen an average decline of 8.6% since the beginning of August, underperforming both the S&P 500 and Nasdaq indices. The sell-off has been exacerbated by a weak July jobs report and the unwinding of the yen "carry trade," prompting investors to shift their focus away from the tech sector. Nvidia, a key player in the AI market, is currently trading 37% below its all-time high, while the Nasdaq has experienced a 15% decline, reflecting broader concerns about the sustainability of tech stock valuations in the current economic climate.