Nasdaq loses another 2% as Big Tech sell-off increases and Dow loses 300 points
Stock futures fell Tuesday as the rotation of relatively higher-priced technology stocks increased.
The futures for the tech-heavy Nasdaq 100 lost 2%. S&P 500 futures traded 1.3% lower, while those pegged to the Dow fell 300 points.
Big tech stocks were back in the red on Tuesday. Apple was down almost 3%, while Facebook, Alphabet and Amazon were down more than 2% in premarket retail.
Tesla stock, the poster child for growth stocks with high valuations and expectations, fell nearly 7% in premarket trading. A Reuters report that the electric car maker had suspended plans to expand its Shanghai plant into an export center also contributed to the decline.
“It has been an intensification and acceleration of money, spinning towards sectors that are more exposed to 1) economic reflation (i.e. cyclical) and 2) rising inflation,” Tom Essaye, founder of Sevens Report, said in one Note.
Tech stocks, which were the pandemic’s biggest winners, fell out of favor earlier this year as fears of inflation and higher interest rates mounted. Growth-oriented companies tend to be hit hard by rising interest rates as they affect the value of their future earnings.
Recent headlines, including labor shortages and a surge in the consumer price index in March, helped fuel inflation worries and accelerate sales of technology stocks.
Big tech was overwhelmed on Monday as investors left stocks like Apple and Microsoft, pulling the Dow Jones Industrial Average and S&P 500 from record highs. Both stocks lost at least 2% at the start of the week.
The Nasdaq Composite suffered from poorer sales and fell 2.5%. With that he ended the day at his session low on Monday. Facebook lost more than 4% while Amazon and Netflix both fell over 3%. Alphabet fell more than 2% after being downgraded by Citigroup. Cathie Wood’s Ark Innovation ETF fell 5% to its lowest level since November when Tesla, its top position, lost more than 6%.
The ARK Innovation ETF lost another 4% in premarket trading on Tuesday.
The market was split in May, with the Nasdaq Composite down 4% and the Dow 2.5% as investors move away from relatively high-valued growth stocks to value stocks on the pandemic reopening the economy and higher inflation will benefit.
The Technology Select SPDR (XLK) was down 3% in May, the worst of any market sector. The XLK fell another 1.3% in premarket trading on Tuesday.
The broader S&P 500 managed to barely stay in the green in May amid this market rotation, but it may lose that profit if tech sales rise and value stocks persist.
The Simon Property Group recorded a price decline of around 3% on the pre-market, despite better-than-expected figures. The property manager reported earnings of $ 1.36 per share on revenue of $ 1.15 billion for the first quarter.
The Ministry of Labor will release the latest results of its survey on job vacancies and workloads on Tuesday. Several senior officials from the Federal Reserve, including Governor Lael Brainard and New York Fed President John Williams, are also due to make comments.
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