Facebook and Amazon lead tech sell-down that pulls markets down

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The losses are driven by Facebook and Amazon

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US stocks fell as the selloff in tech stocks resumed amid the threat of persistently high inflation.

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The S&P 500 fell more than 1% – below its 100-day moving average – while the Nasdaq 100 fell more than 2%.

The losses were led by high-growth tech companies – including Amazon.com Inc. and Facebook Inc. – while vaccine makers were also down following Merck & Co.’s announcement of a COVID drug – 19 effective. Energy stocks, meanwhile, were higher, as were oil prices.

“There is a wall of concern that the markets are trying to climb right now,” Deutsche Bank strategist Jim Reid said in a note. “We have an energy crisis, supply chain issues, higher inflation, signs of weaker growth and a lot of talk about stagflation.”

Global markets have taken a turn at risk amid a growing list of concerns, just as investors braced for the Federal Reserve to start phasing out stimulus measures as early as next month. Higher inflation and Treasury yields make the premium investors pay for high-growth stocks less attractive. The risk to profits may also be higher for some technology companies.

“Tech stocks are probably the hardest hit, as higher interest rates mean higher discount rates for future earnings,” said Brian Price, head of investment management for Commonwealth Financial Network. “I expect this momentum to continue as long as inflation expectations remain at their highest.”

Fears of an energy crunch have also added to concerns about inflation with European electricity and gas prices soaring before the onset of winter. Germany’s November power contract hit a record high as natural gas futures extended a rally on Monday. Meanwhile, crude oil in New York reached its highest level since 2014, as OPEC + agreed to increase production for November.

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“The post-pandemic recovery appears to be stumbling,” said Fiona Cincotta, senior financial markets analyst at City Index. “Supply shortages and the worsening energy crisis mean that prices are rising and high inflation may not be as transient as the Fed initially thought.”

The yield on 10-year Treasuries reduced gains after climbing to 1.5%. The dollar slipped for a third day. Shares in Europe, Japan and Hong Kong fell. Markets in mainland China are closed until Thursday for the Golden Week holidays.

Some of the main movements in the markets:

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  • The S&P 500 fell 1.6% at 11:35 a.m. KST
  • The Nasdaq 100 fell 2.4%
  • The Dow Jones Industrial Average fell 1.3 percent
  • The Stoxx Europe 600 fell 0.4%
  • MSCI World index fell 1.2 percent

Bloomberg.com


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