Nikola's Trevor Milton steps down amid fraud claims, tech stocks extend several weeks' worth of declines

Yahoo Finance's Emily McCormick joins Yahoo Finance’s The First Trade with Alexis Christoforous and Brian Sozzi to discuss what's weighing on the markets on Monday morning.

Video Transcript

ALEXIS CHRISTOFOROUS: I want to bring in Yahoo Finance's Emily McCormick, who has been tracking the early stock market action. And, Emily, it looks like those high-flying tech stocks that sent the market to record highs over the summer are exactly what's driving us lower today.

EMILY MCCORMICK: That's right, Alexis. And taking a look at the pre-market moves, we do have those tech shares sharply lower and extending the past few weeks worth of declines now. Those previously high-flying tech names like Apple, Amazon, Facebook, Alphabet, Netflix, and Microsoft all heading lower here in the pre-market session.

We also have chip makers including in Nvidia and Advanced Micro Devices each off about 2% in pre-market trading, also contributing to that drawdown that we're seeing in tech names. Now, broadening out, taking a look at those three major indices, we have those on track to add to the past three weeks worth of declines. The S&P 500, as of Friday's close, was already at its lowest level in more than a month and then pulled back a total of more than 7% from its recent closing high as recent as September 2, so just earlier this month.

Now, taking a look at what analysts are saying is really contributing to this pullback. Nicholas Colas of DataTrek wrote in a note this morning. He said that three main factors were at play here.

The first is the weakness that we've been seeing in real time economic indicators. So those are things like jobless claims, that estimates missing retail sales report we got last week, and others that are pointing to a slowdown in the economic recovery. Second of all, we are seeing a stagnation in terms of movement on a fiscal stimulus bill out of Congress. That's something that could potentially reverse the slowdown that we're seeing in economic activity. But, of course, not seeing any progress there.

And then third is that lackluster forecast we received from the Federal Reserve in its summary of economic projections last week. Now, outside of these factors, we also have a-- really, a stagnation that we're seeing in coronavirus case improvement in the US and abroad, also contributing to investor jitters here. We also have political uncertainty both around the presidential election and now over who might become the next Supreme Court Justice at play. So a number of contributing factors this morning all leading to this drawdown of 2% plus, really, that we're seeing here, Alexis.

ALEXIS CHRISTOFOROUS: Now, a dizzying amount of information that investors need to digest here to start the new trading week. We have to touch on Nikola, though, down about 27% here in the premarket. We received word this morning that its founder and executive chairman Trevor Milton, who's been on our show a number of times, now deciding to step down. What can you tell us?

EMILY MCCORMICK: Well, this was an unexpected move, Alexis, coming overnight from Trevor Milton. He posted on his personal Twitter page that he would be stepping down effective immediately. He's going to be replaced by Stephen Girsky, former vice chairman of General Motors.

He's a member of Nikola's board now. And he's been appointed as chairman of the board effective immediately as well. Now, these moves coming in the wake of allegations from the short seller Hindenburg that Milton and the company made false statements to investors.

Now, that report first came out September 10. Nikola has released a couple of statements in the past couple weeks in the wake of this, calling it a, quote, "false and defamatory report." Now, in his statement this morning, Milton himself wrote, quote, "the focus should be on the company and its world-changing mission, not me. I intend to defend myself against false allegations leveled against me by outside detractors."

Now, taking a look at what Wall Street is saying about this move, Dan Ives of Wedbush out already with a note this morning, calling this, quote, "while there will be a lot of worries on the Street around Trevor's departure, especially in light of the bear noise recently with the company, going forward, Nikola has a strong bench. And now it's all about execution going forward with the General Motors partnership, a linchpin to its success. In a nutshell, Nikola is still a prove-me stock, which speaks to why we are watching this from the sidelines with a neutral rating." Now, as you mentioned, seeing those Nikola shares sell off further in pre-market trading, down to just about $25 per share, Alexis?

ALEXIS CHRISTOFOROUS: All right. Emily McCormick, thank you.