Anxiety is everywhere with tech investors aggressively selling stocks as yields rise and traders await the US Federal Reserve’s rate decision later this week.
Valuations have fallen to levels not seen since the early days of the pandemic. The tech-heavy Nasdaq 100 index is at its most oversold level since 2018, while chip stocks are off to their worst start in at least 27 years. And a technical gauge that measures buying strength versus selling strength – known as the Bloomberg Fear and Greed Indicator – has fallen to an all-time low.
Netflix, Nvidia and Tesla were among the biggest losers Monday on the Nasdaq 100, plunging more than 5%. It’s the latest example of weakness in growth stocks, which have been hammered by soaring Treasury yields this year in 2022. Meanwhile, investors are bracing for the Fed to reiterate its hawkish policy tilt this week. .
The&The P 500 index is on the verge of a correction, while the Nasdaq 100 is in the midst of its longest losing streak in more than four months, as investors fear that the Fed’s efforts to fight inflation will pinch valuations of the sector.
“Hopefully the Fed will calm the markets at its meeting because the selling has been so strong it has spooked bearish buyers,” said Tim Ghriskey, senior portfolio strategist at Ingalls. & Snyder, who has about $8 billion in assets ($11 billion). “There’s been a lot of panic selling, aggressive selling, although I think if it reverses it could reverse very quickly.”
The sudden tech rout has sent stock market valuations to their lowest level since the early months of the pandemic, and it comes just at the start of the group’s earnings season.
To be sure, the Nasdaq 100’s forward price-to-earnings ratio is still 25% above its decade-long average, even with a valuation down 21% from its 2020 high. as Apple, Microsoft and Tesla are all set to report earnings this week, investors will be watching closely for signs that earnings growth has begun to level off.