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US tech stocks set for worst day since March as pandemic winners suffer


US technology stocks were on course for their worst daily performance since mid-March as a strong quarterly earnings season drew to a close and investors queried whether the big winners of the pandemic could sustain their performance as economies reopen.

On Wall Street, the technology-focused Nasdaq Composite index dropped 2.6 per cent, heading for its weakest session since March 18. The broader-based S&P 500 fell 1.3 per cent, dragged down by technology shares.

Shares in Apple fell 4.2 per cent, on course for their largest drop since October last year. Facebook, Google parent Alphabet and chipmaker Intel all dropped more than 2 per cent.

US Treasury secretary Janet Yellen warned on Tuesday that interest rates might need to rise to keep the US economic expansion from bubbling over, comments that exacerbated the sell-off in technology stocks. 

“It may be that interest rates will have to rise somewhat to make sure that our economy doesn’t overheat,” she said at an event hosted by the Atlantic magazine.

Europe’s Stoxx 600 index closed 1.5 per cent lower, with tech stocks also falling the most. Shares in German software group SAP fell more than 3 per cent and Dutch semiconductor equipment maker ASML lost almost 5 per cent of its stock market value.

The moves came after the large tech groups stunned Wall Street with surging first-quarter sales and profits that underscored how much they had benefited from consumers staying at home during lockdowns.

Investors were now “getting out of lockdown stocks in the short term”, said Didier Rabattu, head of equities at private bank Lombard Odier, as they looked ahead to “strong economic growth and participated in reopening trades”.

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The US economy grew 6.4 per cent in the first quarter of this year, data released last week showed. On Friday, non-farm payrolls data are expected to show the US economy added close to 1m new jobs in April.

“We have lowered our exposure to the US market and particularly to tech, where companies’ results have been strong but valuations are probably now too high,” said Juliette Cohen, strategist at CPR Asset Management.

Investors in US technology businesses were also concerned about President Joe Biden’s proposed corporate tax rises that were set to hit earnings in this sector the hardest, Cohen added.

Consumer cyclical shares listed on the S&P 500 also fell 1 per cent on Tuesday as investors became concerned about the effect of rising input costs on commodity-dependent businesses.

The price of copper hit its highest level in a decade last week, while a commodity price index compiled by Bloomberg has gained almost 17 per cent this year. Oil continued its advance on Tuesday, with Brent crude futures adding 1.9 per cent to $68.86 a barrel.

Stocks of copper in global warehouses cover “just 3.3 weeks of demand”, said Michael Widmer, commodity strategist at Bank of America.

“The fundamental backdrop is so concerning because the global economy is just now starting to open up,” he said.

The dollar, as measured against a basket of currencies, strengthened 0.4 per cent as investors moved in to the haven asset while government debt prices also rose.

In debt markets, the yield on the 10-year US Treasury fell 0.02 percentage points to 1.589 per cent.

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Treasury yields have climbed from around 0.9 per cent at the start of the year, but moderated since March after the US central bank pledged that temporary bursts of inflation would not persuade it to tighten monetary policy.



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