Tech stocks have been the powerhouse of the rebound in Wall Street shares since the depths of the pandemic in March 2020 – on Monday they headed towards correction territory as Nasdaq slumped more than 2%.
Nasdaq was in correction in March and April of this year only to recover, but the outlook is changing with regard to the business models of some of the majors, such as Facebook, Snap, Twitter, Instagram, Google and YouTube.
News of the Wall Street slide came despite a sharp 1.2% jump in new US factory orders in August, even though other data have pointed to a slowing in demand among consumers because of Covid Delta, not to mention the continuing negative impact of the computer chip shortage.
The Dow fell 323.54 points or 0.9% to 34,002.92, despite large gains in Merck (up 2.1% on news of a new Covid treatment pill). The S&P 500 shed 1.3% to 4,300.46 but the tech-skewing Nasdaq fell 2.1%.
That left the Nasdaq down more than 7% from its most recent peak in July. Nasdaq needs to close below 13,836.90 to reach correction territory, the index last entered correction on March 8, 2021 and it exited the correction on April 9, 2021, according to Reuters data.
On Monday, it finished at 14,255.48, and has been down six of the past seven trading sessions.
The ASX 200 was down 68 points in overnight futures trading. That’s after the 1.3% jump on Monday, thanks to the surge in bank shares, led by the Commonwealth which was knocked down in the rush for its $6 billion share buyback – it got offers totalling $24 billion worth of shares.
Wall Street saw large tech shares like Apple, Amazon, Spotify, Netflix and Microsoft all fell as 10-year bond yields traded around 1.48% – down from late last week and highs of 1.56% to more than 1.57% in trading.
Inflation worries and a rise in the value of the greenback have helped undermine tech share prices, but that’s not the only reasons.
There are growing concerns about privacy and fears of a looming crackdown on social media platforms like Facebook, Snap and Twitter. Facebook shares lost 4.9% on Monday and Twitter and Snap shares tumbled more than 5%.
Facebook itself had a massive worldwide outage on Monday that lasted more than five hours and took Instagram and WhatsApp with it. It was the worst outage for the platform since 2008 (when it only had 80 million users against 3 billion now).
Wall Street is still rattled by September’s sell-off. The S&P 500 finished the month down 4.8%, breaking a seven-month winning streak. The Dow and the Nasdaq Composite fell 4.3% and 5.3%, respectively, suffering their worst months of the year.
Facebook was also hit by the continuing fall out from a series of investigative articles by the Wall Street Journal based on leaked documents by a Facebook former product manager, Frances Haugen, who went public on 60 Minutes on Sunday night.
Deadline.com said the data she provided showed Facebook had internal data showing its products were damaging to users in various ways but kept quiet. She is scheduled to testify on Capitol Hill Tuesday (tonight, Sydney time) amid a drumbeat of criticism among lawmakers of big tech and rising calls for tighter scrutiny, especially over new platforms proposed by the social media giant.
Despite another solid day for the US dollar (the Aussie traded around 72.85 US cents), gold rose 0.6% to $1,767.60 and world oil prices settled close to 7-year highs after OPEC decided to keep its oil cap release on track and not increase the size of the reductions beyond 400,000 barrels a day because of higher prices.
That saw West Texas Intermediate US crude rise more than 2% to $US77.62 while Brent topped $US81 a barrel to settle at $US81.26, and then rise to around $US81.60 in early Asian trading.
Iron ore prices settled higher in limited trading because of China’s week-long National Day holiday. The price of 62% Fe fines delivered to northern China rose 1% to $US117.12 a tonne. 58% Fe fines jumped 3% to $US90.73.
That was helped by news of a deal being done in China to throw a $US5.1 billion lifeline to the struggling property giant, China Evergrande.
