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Nasdaq drops as tech stocks hit by interest rates rise expectations

Investors have been offloading shares most sensitive to higher interest rates, such as loss-making growth companies.

Article originally published by The Telegraph. Hargreaves Lansdown is not responsible for its content or accuracy and may not share the author's views. News and research are not personal recommendations to deal. All investments can fall in value so you could get back less than you invest.

Investors have been offloading shares most sensitive to higher interest rates, such as loss-making growth companies.

The Nasdaq sank over 2.5pc yesterday as New York’s tech stocks were dealt another blow.

The US index touched its lowest level since October, trading at 14,806, which is also below its 100 day average. It has shed 5pc since the start of the year.

Investors have been offloading shares most sensitive to higher interest rates, as a raft of Federal Reserve officials signaled their intention to combat inflation aggressively.

Rising rates could drive investors toward value stocks, which tend to be more cyclical and offer near-term cash flows, instead of growth stories such as technology companies, which can be expensive and offer fewer chances of returns.

Kara Murphy, chief investment officer of Kestra Investment Management, told Bloomberg: “Tech is the classic example of an area where stocks have really benefited from the decline in rates.

“As expectations rise for rates going forward, then it makes sense that would be the area that would get hurt more.”

Scott Ladner, chief investment officer at Horizon Investments, said: "The market is really coming to grips with selling really highly valued, profitless tech names and finding other places to put money."

He added that many of the big tech companies with solid revenue and profits, such as Apple and Microsoft, will suffer less than their counterparts that have little revenue but strong outlooks.

The markets also reacted negatively to the Supreme Court blocking Joe Biden’s proposed rule that would have required employees of large businesses to get mandatory Covid vaccines or periodic tests.

The policy, which would have applied to 80m workers, was deemed an improper imposition on the lives and health of many Americans by conservative justices.

Adding some anxiety for investors, US companies are due to report results on the final quarter of 2021 in the coming weeks.

Banks JP Morgan Chase, Citigroup and Wells Fargo are publishing updates on Friday, while big technology companies report next week.

This article was written by Giulia Bottaro from The Telegraph and was legally licensed through the Industry Dive publisher network. Please direct all licensing questions to legal@industrydive.com.


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    Article originally published by The Telegraph. Hargreaves Lansdown is not responsible for its content or accuracy and may not share the author's views. News and research are not personal recommendations to deal. All investments can fall in value so you could get back less than you invest.

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