Tech stocks lead the Nasdaq much lower on Wall Street

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Tech stocks were beaten again on Monday, with the Nasdaq closing more than 4% as investors dumped shares of well-known companies, concerned about the prospects of slowing growth, higher inflation and higher inflation. an increase in interest rates.

After recording its worst month since 2008 in April, the tech-focused index continues to deflate, with many companies at risk of seeing their gains from earlier phases of the pandemic, boosted by the remote everything boom, wiped out.

The Nasdaq has lost more than a quarter of its value since the start of the year as pandemic favorites such as Peloton, Netflix and Amazon have faced strong sales. Software company Palantir and electric vehicle maker Rivian each lost more than 20% on the day.

The recent stock market plunge is one of many indicators economists are watching closely as they attempt to predict the general direction of the economy. At 3.6%, the unemployment rate remains very low, but growth has slowed markedly and the economy has actually contracted in the first three months of 2022. Tech companies have led a broad market recovery with little long after the start of the pandemic more than two years ago, but there has been an abrupt reversal in recent months.

Tech companies saw sales surge early in the coronavirus pandemic as consumers searched for products and services that could keep them connected while they isolated at home. Some companies cram five years of growth into two years. But now, as investors react to the prospect of a sluggish economy, big business is also paying the price for high inflation and the possibility of a recession.

If consumers cut spending, investors don’t know if streaming subscriptions, online shopping and the latest smartphones and gadgets will disappear from shopping lists.

“It’s a perfect storm for investors with nowhere to hide as Fed hikes, inflation, geopolitical issues and concerns about a recession abound,” said Dan Ives, chief executive. of Wedbush Securities. “Tech stocks are being crushed on this flight to safety, and it’s a bear market mentality with the pain threshold tested for tech investors.”

Apple kicked off 2022 by becoming the first company to be worth $3 trillion. But in just a few months, despite posting record earnings last quarter, its share price has fallen more than 16%. Microsoft shares fell 20%, dragging its valuation below the $2 trillion mark. Amazon fell 5% on Monday and is down more than 35% for the year. (Amazon founder Jeff Bezos owns The Washington Post.) Facebook, meanwhile, is down 40% and has instituted a hiring freeze, which is considered a type of layoff in Silicon Valley.

The broader S&P 500 index slipped more than 3.2%, or more than 132 points, to hit a new low in 2022 after posting its longest weekly losing streak since 2011.

The Dow Jones Industrial Average fell 653 points, or nearly 2%, racking up more pain after the blue chip index suffered its worst beating since the early days of the pandemic last week.

Cryptocurrencies, whose movements have followed the Nasdaq in recent months, have also fallen. After a temporary Federal Reserve-induced hike last week lifted it above $40,000, bitcoin was trading down nearly 9% on Monday at $31,512. Ethereum, another popular cryptocurrency, fell 9.3% to $2,323. Coinbase, the cryptocurrency trading platform, saw its stock drop nearly 20%.

“The psychology of the market is driven by greed and fear,” said Wayne Wicker, chief investment officer at MissionSquare Retirement. “Market volatility today is driven by uncertainty about the future rate of inflation and what action the Fed will take in its attempt to stifle price increases.”

After an initially positive reaction to the Fed’s interest rate hike on Wednesday – the second of seven scheduled for 2022 – investors wrung their hands over the central bank’s approach to curbing inflation, this which could make borrowing more costly for businesses and households.

Fed officials are trying to raise interest rates at a pace that doesn’t completely stifle economic growth, a difficult balance to strike. If the economy cools too quickly, it could slide into a recession, generally defined as two consecutive quarters of decline.

Investors seem to doubt the ability of the central bank to control inflation without triggering a recession. Cboe’s VIX, known as the “Wall Street Fear Gauge,” is up nearly 99.5% year-to-date, according to MarketWatch.

“You have to look pretty carefully for positive catalysts in the current market environment,” said Brian Price, head of investment management at Commonwealth Financial Network. Although the outlook has turned pessimistic, he said, “any positive development on the geopolitical front, or a weaker than expected situation [consumer price index] report later this week, could help turn the tide and see investors embrace risky assets again.

Tyson Foods raised its full-year sales outlook as it reported earnings and revenue that beat analysts’ expectations on Monday, its performance rattled by price increases the company said it implemented to offset the rise. labor costs and inflation.

“While we continue to see inflationary pressures in the supply chain, we are working to reduce costs by continuing to increase our efficiency, productivity and bringing more capacity online,” said the managing director of Tyson, Donnie King, in the company’s earnings report. The shares rose 2.2%.

In Asia, markets closed sharply lower as the weight of China’s zero-tolerance coronavirus restrictions continued to weigh on business activity in the region. Hong Kong’s Hang Seng index closed down 3.8%, while Japan’s Nikkei 225 fell 2.5%. The Shanghai Composite Index was nearly flat.

European markets closed negative across the board, with the benchmark Stoxx 600 down 2.9%.

“The continued impact of Beijing’s zero-covid policy in China and concerns over the Fed’s next actions are contributing to increased pressure on markets,” said Russ Mould, chief investment officer at AJ Bell. “The impact of Chinese restrictions was reflected in export growth which hit its lowest level in two years in April – in fact where we were near the start of the pandemic.”

Oil prices fell after Japan became the latest Group of Seven country to ban imports of Russian oil. Brent crude, the international oil benchmark, edged down 6.5% to trade around $105 a barrel. West Texas Intermediate crude, the US benchmark, fell 6.8% to trade around $102.30 a barrel.

Unease permeated bond markets, which briefly pushed the yield on the 10-year U.S. Treasury note past 3.185% on Monday, its highest level since November 2018. Bond yields move inversely to prices.

Reed Albergotti contributed to this report.

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