U.S. tech stocks suffered another blow on Tuesday after the Nasdaq Composite announced its worst month since the financial crisis, and investors were preparing for a new series of earnings reports.
The Nasdaq fell about 1 percent in morning business in New York after falling 9 percent in January in its worst one-month decline since November 2008. The blue chip S&P 500 fell 0.6 percent on Tuesday, after the worst month since 2020
The decline came as retailers awaited earnings following the closure of Google’s parent Alphabet, one of the world’s largest publicly listed companies. The owner of Amazon and Facebook Meta will also release his latest quarterly data this week.
Earnings from fellow tech heavymen Apple and Microsoft “set a positive tone for the street going on this week,” Wedbush analyst Daniel Ives said in a note to clients. However, traders are also struggling with rising interest rates, making holding shares of technology companies whose high estimates are based on expectations for a long period of high growth seem less attractive.
“Will the rising rate environment make the Street ultra-sensitive to forward-looking technological space estimates?” Ives asked. “The answer is explicitly yes,” he said. “However, the digital transformation that is happening to businesses and consumers today is not slowing down.”
After falling last month, some investors see February as an opportunity to buy in a fall caused by excessive price increases in the markets this year, while others warn that it is too early to turn to bulls.
“It’s our bias,” said Ben Bennett, head of investment strategy in legal and general investment management, “to buy weaknesses”.
“Economic growth should remain strong in the coming quarters,” Bennett added, which would mean “improving corporate fundamentals.”
“I don’t think we’re done,” said Kasper Elmgreen, Amundi’s head of stock, “with this struggle between rising rates that put pressure on stock valuations and the counterpoint to pretty solid earnings.”
Tensions between Russia and Ukraine could further raise oil prices, Elmgreen added. “And energy prices are pretty important because we’re already in a market where inflation is rising and that’s the whole reason the Fed has to jump in.”
Future markets predict that the Fed will raise rates five times this year after bringing borrowing prices closer to zero in March 2020. Brent oil, the benchmark for oil, was stable at $ 89.30 a barrel on Tuesday, but remained close to its highest price since 2014.
In Europe, the Stoxx 600 stock index rose 1 percent, led by stocks of banks that tend to benefit from expectations of increased borrowing costs.
The German Bund’s 10-year yield remained above zero on Tuesday, with a rare permanent exit from negative territory as high inflation put pressure on the European Central Bank to reconsider its ultra-loose monetary policy.
The ECB is holding its next monthly meeting on Thursday, following a jump in price growth in Germany and Spain.
Yields on 10-year U.S. Treasury bonds, a benchmark for determining the price of debt worldwide, rose 0.03 percentage points to 1.81 percent.
In Asia, Hong Kong’s Hang Seng index rose 1.1 percent, and South Korea’s technology-rich Kospi gained 1.9 percent.