A second day in a row where a sell off in tech stocks has rattled Wall Street – taking over from weak energy prices as a major concern.
The S&P 500 had its worst day in six weeks after tech sold off again overnight Tuesday. helping boost negative sentiment was a delay in the Trumpcare health bill going into the US Senate – which raised more concerns about the Trump administration’s ability to deliver on its economic agenda, remarks from the head of the European central bank, a cyberattack and a growing belief that the long surge in leading tech shares such as Amazon and Facebook, was over.
Not even news from Facebook that it now had 2 billion users around the world (made in a bog post by CEO Mark Zuckerberg) could change the growing negative sentient about the tech majors
The Australian market will open softer with a loss of 10 points or so on the overnight futures market.
On top of that the US dollar fell, hitting a 10 month low against the euro and US bond yields rose sharply on those comments from European Central Bank president Mario Draghi who called an end to the dangers of deflation in Europe and indication that reflationary pressures were now the chief concern.
The S&P 500 dropped 0.8% to end at 2,419.38 — with financials the only major sector to hold on to their gains — its biggest one-day drop since May 17. The Dow fell 0.5% to 21,310.66, but Nasdaq was hammered by the sell down in tech shares, losing 100.53 points, or 1.6% to 6,146.62.
Tuesday’s drop in tech shares came as Brussels hit Google with a 2.42 billion euro ($A3.5 billion) fine over abusing its dominance of internet search engines — sending shares in its parent Alphabet down 2.1% lower to $US951.23 (that was the single biggest fine levied by the EU).
On top of that there was a cyberattack in Europe that hit global companies and Ukraine’s government and bank infrastructure spooked investors.
The tech sell off continues the trend that started a week or so ago as a generally softening in the prices of sector leaders such as Facebook, Amazon, Microsoft, Alphabet (Google), Netflix.
While the Nasdaq is up more than 14% in the first half of the year, it has marked time and weakened slightly in the past fortnight, refusing to rise above its June 8 record close.
At the same time the International Monetary Fund has downgraded America’s growth prospects for this year and next and removed any estimate of stimulus from the policies of President Donald Trump from their figures.
In other words The IMF reckons Trump will not get through his tax plan, his infrastructure plan or any of his other ‘policies’ that could add to US growth so this year’s estimate for GDP growth has been cut to 21% from 2.3% and there will be no change next year with 2018’s dropped to 2.1% from 2.5%
The Fund said the US will probably have a hard time hitting Trump’s target of 3% annual growth as it’s faced with problems ranging from an ageing population to low productivity growth, and with a labor market already back at full employment, the fund said in its annual economic assessment released Tuesday.
Given the uncertainty on policy (as we saw overnight with a two week delay on the Senate version of Trumpcare), Alejandro Werner, director of the IMF’s Western Hemisphere Department, said at a briefing in Washington. “we have removed the assumed fiscal stimulus from our forecast,” he was quoted as telling media.
The delay on the Senate’s version of Trumpcare until after July 4 became clearer as the session and selling picked up in the final hour of trading.
The dollar index, a measure of the buck against a basket of six major currencies peers, fell 1.1% to 96.38 — its steepest one-day drop since January 5. Elsewhere, US bond yields joined the European bond sell-off fell after markets took Mr Draghi’s remarks to mean that the ECB could start slowing its bond buying programme sooner than expected. On top of these comments Federal Reserve chair Janet Yellen again said the central bank remains on track to raise rates.
That helped drive the yield on the US 10-year up 6.6 basis points to 2.2% — the highest since before the Fed’s interest rate rise on June 14.
