- Technology stocks on Nasdaq see a record fall on Thursday.
- The federal Reserve has indicated a hawkish stance and economic tightening.
- Technology stocks in the US are sensitive to interest rate movements.
On Thursday, a near-record number of US Nasdaq listed tech stocks plunged by 50% or more, echoing the dot-com crash. Around 4 in every 10 companies on the Nasdaq composite index saw market values getting halved from their 52-week highs.
Why are US tech stocks taking NASDAQ down?
- As mentioned in a Bloomberg article, the tech wreck is based on investors selling these stocks.
- The historically high valuations and the Fed’s indication of a tightening economic cycle are scaring investors.
- Tech stocks are burdened since beginning of the year with a bond-market sell-off taking 10-year treasury yields to 1.72%.
- It has worsened further after the Fed’s last policy meeting on Wednesday reflecting a faster rate hike, and a hawkish stance.
- This has led the Nasdaq tech stocks on the verge of a dot-com crash repeat. The technology stocks’ crash is almost a record and the biggest weekly fall since November.
- Wednesday’s Federal reserve meeting has indicated a rise in interest rates much quicker than expected, taking a toll on shares of sensitive tech companies.
The probability of a faster rate hike from the Federal Bank is triggering doubts on valuation of technology stocks. Investors are quickly removing them from their kitty, leading to the market value crash.