Nasdaq tech stocks plunge 50% or more, echoing dot-com crash

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Nasdaq tech stocks plunge 50% or more, echoing dot-com crash

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 Nasdaq tech stocks plunge 50% or more, echoing dot-com crash
Image source: © Kaarsten | Megapixl.com

Highlights

  • 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.

Bottom line-

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.

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