Dow Today – Tech selloff sinks Nasdaq 100 most since September
Technology companies drove stocks down on speculation that rate hikes will reduce the appeal of the highly valued industry that has powered the bull market in equities.
The Nasdaq 100 sank the most since September, led by losses in giants like Apple Inc. and Tesla Inc. Software giant Adobe Inc. tumbled 10 per cent on disappointing revenue forecasts, while a gauge of chip stocks slumped about 4 per cent. The S&P 500 erased gains that were earlier triggered by bets central banks can tighten policies to fight inflation without derailing the economy. Financial, commodity and industrials shares rose. Bitcoin slid.
Even with the weakness on Thursday, tech shares remain among the most-notable outperformers of 2021. Valuations have soared to levels last seen during the dot-com bubble, with Apple recently approaching what would be a historic US$3 trillion market capitalization. While the outlook for rate hikes threatens the industry’s appeal, several analysts expect the group to still do well due to its strong earnings potential.
Meantime, policy makers are weighing measures to fight price pressures while balancing risks to growth. The European Central Bank temporarily boosted regular monthly bond buying for half a year to smooth the exit from crisis stimulus. The pound gained as the Bank of England unexpectedly raised rates. The announcements followed Wednesday’s decision by the Federal Reserve to accelerate the pace at which it tapers asset purchases, while projecting rate hikes through 2024.
- “Bitcoin and big tech are getting punished today as investors reallocate some of their more profitable risky bets. The growth outlook still remains upbeat for next year,” with some traders rotating back into cyclicals, said Edward Moya, senior market analyst at Oanda.
- “While we expect increased stock-market volatility as the Federal Reserve embarks on normalizing policy, equity markets should end the year higher as the economy still remains strong, which should lead to continued earnings growth,” said Richard Saperstein, chief investment officer at Treasury Partners.
- “I do think that central banks are being reactive, which is good. If inflation does start to moderate as these major central banks are still expecting, we may actually expect some turn in the policy direction in the later part of next year,” said Janet Mui, investment director at Brewin Dolphin.
- Apple is hiring engineers for a new office in Southern California to develop wireless chips that could eventually replace components supplied by Broadcom Inc. and Skyworks Solutions Inc.
- Delta Air Lines Inc. projected it will report a profit this quarter, citing strong demand for travel and a decline in jet-fuel prices.
- Reddit Inc., the social-media platform that helped fuel this year’s meme stock frenzy, said it has confidentially filed for an initial public offering.
Applications for state unemployment benefits rose last week — but remained near the lowest levels of the pandemic as the labor market recovery continues. U.S. housing starts strengthened in November to the fastest pace in eight months, while output at factories advanced solidly.
Here are some key events this week:
- Bank of Japan monetary policy decision, Friday.
- S&P Dow Jones Indices quarterly rebalance effective after markets close, Friday.
Some of the main moves in markets:
- The S&P 500 fell 0.9 per cent as of 4 p.m. New York time
- The Nasdaq 100 fell 2.6 per cent
- The Dow Jones Industrial Average was little changed
- The MSCI World index was little changed
- The Bloomberg Dollar Spot Index fell 0.5 per cent
- The euro rose 0.4 per cent to US$1.1332
- The British pound rose 0.4 per cent to US$1.3321
- The Japanese yen rose 0.3 per cent to 113.65 per dollar
- The yield on 10-year Treasuries declined three basis points to 1.43 per cent
- Germany’s 10-year yield advanced one basis point to -0.35 per cent
- Britain’s 10-year yield advanced two basis points to 0.76 per cent
- West Texas Intermediate crude rose 1.6 per cent to US$72.02 a barrel
- Gold futures rose 2 per cent to US$1,799.20 an ounce