Investors and Analysts Respond to Falling Tech Stocks

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Investors and analysts reacted to a drop in heavy tech stocks as US Treasury yields continued to climb, investors taking into account the prospect of more aggressive rate hikes from the US Federal Reserve.

By mid-afternoon, the tech-rich Nasdaq was down 1.17%, after falling nearly 3% previously. It fell below its 200-day moving average and at its lowest it was more than 10% down from the intraday high on November 22. A decline of 10% on a near-close basis is considered a bullish market correction.

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Wall Street’s benchmark S&P 500 was down 0.88%.

PAUL HICKEY, ANALYST AND CO-FOUNDER, BESPOKE INVESTMENT GROUP, HARRISON, NEW YORK (email)

The Nasdaq Composite is also set to close below its 200-DMA today for the first time since April 2020. At 434 trading days that would end what has been the third longest streak of close. above 200-DMA for the Nasdaq since its inception. “

“In this scenario, forward yields have generally been lower than average on a median basis, with underperformance over the next week, three, six and twelve months. Over the next week, the Nasdaq continued to fall more than half the time for a median drop of 0.11%, and a year later it was only three times higher by double-digit percentages. and down more than 10% three times as well. Historically speaking, the earlier 200-DMA breakouts for the Nasdaq have not necessarily been the most bullish patterns going forward. “

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PETER TUZ, PRESIDENT OF CHASE INVESTMENT COUNSEL IN CHARLOTTESVILLE, VIRGINIA

“It is somewhat linked to the rise in interest rates that we have seen since the start of the year. Higher multiple stocks without profits or dividends suffer. “

“People are worried about the results next season, if Omicron will hurt the numbers. Overall, people are concerned that Omicron will cause a mini-slowdown for a while.

“People remain concerned about the appearance of inflation and how the Fed is going to act to alleviate it. The concern is related to each stock but can affect the technology. “

“Technology, especially companies with low or no profits and / or high multiples, suffers when rates rise sharply, as future profits and what they are worth today become more suspect. “

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LINDSEY BELL, CHIEF MONEY AND MARKETS STRATEGIST, ALLY INVEST, CHARLOTTE, NORTH CAROLINA (email)

“Tech investors get nervous when the Fed starts planning for a rate hike because that means growth won’t be as good tomorrow as it is today. Despite this, history shows that the technology can work well within 12 months of the first hike. “

“Emotions are hot right now. Cooler heads will prevail when the pricing environment is better understood. If the Fed raises rates at a steady, steady pace, cash flow and margins can be more easily managed. S&P 500 earnings growth is expected to slow to a more normal pace this year. In this type of environment, technology is usually one of the best places to find reliable and disproportionate growth.

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RANDY FREDERICK, MANAGING DIRECTOR OF TRADING AND DERIVATIVES AT CHARLES SCHWAB IN AUSTIN, TEXAS

“The technology is not going to go away as a group. The bigger and bigger mega-caps will do well, but the smaller, newer newcomers and those who are exploited will struggle the most, and this will likely continue for some time to come.

“You have a lot of new tech companies that have gone public in the last couple of years and have a lot of debt, they don’t necessarily have good cash flow yet or they don’t have a profit. They may have a bright future going forward, but right now people are getting a little more cautious due to the Fed’s plan to raise rates soon and they are going to walk away from those names.

CHRISTOPHER MURPHY, CO-CHIEF OF DERIVATIVES STRATEGY, SUSQUEHANNA (FROM A RESEARCH NOTE):

“It appears that the turmoil that was initially isolated from the tech sector is spilling over to the rest of the stock market. {NQc1; CF_NAME} We don’t see any rotation today, we see all sectors sold. “

(Compiled by the Global Finance & Markets Breaking News team)

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