Last week, there was a sharp drop in the stock markets across the world, technology sector heavyweights losing the most. The stock market, which had been on an upward trajectory for weeks, recorded sharp declines northwards especially the US market. The Dow Jones Industrial average decreased by 2.9% and closed at 40,345 points. On the other hand, the S&P 500 was down 4.3 % to 5,408 points whereas the worsening situation continued for the technology based index, nasdaq too which was down by 5.8% at 16,690 points.
The S&P 500 and Nasdaq registered their worst weekly losses in one and a half year mainly because of the pressure on the tech sector. This recent fluctuation within the market has made most, who are keen on tech stock investments, unsure whether there will be any more growth of such, especially with the returns these companies had after the COVID-19 crisis.
Mega-Cap Tech Slump
Nvidia NVDA one of the main constituents of AI expansion stock appreciation corrected downwards by 4.1% during the trading session on Friday and was spearheading the general downturn of mega cap tech. In the same way, Alphabet GOOGL also slipped by 4.1%. Similarly, Meta Platforms META and Amazon AMZN each recorded a decline in excess of 3%. Apple AAPL and Microsoft MSFT are also losers for the week.
Broadcom (AVGO) had a particularly difficult week as its shares went down by more than 10%. While it managed to beat analysts’ consensus on earnings for the quarter, the revenue outlook was another cause for discontent among investors. Therefore, Broadcom topped decliners within the S&P 500 index.
The semiconductor industry also took a backseat as the iShares Semiconductor ETF (SOXX) declined by 4.3% on the day. Gold futures fell marginally by around $2,530 but settled above it while Bitcoin price dipped further to almost $53,000, its lowest price in a month.
The tech stock sell-off has come amid data from inflation and labor market suggesting that the United States Federal Reserve is about to become more dovish and cut interest rates to spur growth. As a consequence, the focus of investors has begun to turn away from tech stocks, believing that other sectors will emerge with better prospects in an expanding economy.
This was the case with European and Asian markets. The European equivalent of the S&P 500, the Stoxx 600, dipped 2.5% and Japan’s Nikkei 225 lost 3.19% topping the losses for Asia Pacific markets. As the swings are still present, it is apparent that what is fueling most of the action in the markets is not the long-term position takers but rather momentum traders.
Volvo Cars also made headlines, shedding 4% after it modified its electrification aspirations, which were lowering their objectives for fully electric car sales from 100% to the more realistic range of 90% to 100% by 2030.
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