(ATF) Big tech stocks slumped on Tuesday May 4, with Apple falling almost 4%, Amazon down 3% and the Nasdaq index closing down by nearly 2%. Asian firms that have also benefited from growth stock investing could see similar selling pressure, though US-listed shares for Alibaba were not badly affected.
Treasury Secretary Janet Yellen said in an interview published early in the day that there may be some “very modest increases in interest rates” to prevent overheating in the economy as a consequence of increased government spending.
She later qualified her remarks in a separate conference appearance where she said rate hikes were “not something I’m predicting or recommending.”
Major interest rate markets did not react dramatically to the remarks, with the benchmark 10-year Treasury closing the day unchanged at a yield of 1.59%, which is well below a recent high of around 1.70%, and shows no immediate signs of a push towards a 2% yield that many analysts expect at some point.
The tech stock selling that led most indices lower instead seemed to stem from broader concern that many shares have risen too far, accompanied by a rise in volatility that exacerbated sales pressure.
Growth stocks such as big tech shares were the hardest hit on Tuesday.
Nasdaq's worst day in 2 months
The fall in Apple’s shares was the biggest since last October, while the Nasdaq had its worst day in almost two months. Other indices were not as badly affected, with the S&P closing down by less than 1%.
Chinese firms such as Alibaba, Baidu and Tencent have benefitted from the growth stock buying that helps to underpin prices for US big tech companies, so they may see selling pressure in the Asian trading session on Wednesday May 5.
The selling pressure on the most liquid US big tech stocks was resisted by US-listed shares for some Chinese firms, however. Alibaba’s Nasdaq-listed shares fell by 1.2%, which was much less than the downturn seen for Apple and Amazon. Baidu’s Nasdaq-listed shares fell by 2.4%.
Further volatility could be ahead.
"Wall Street won’t find out if the Fed is making a policy mistake until several months down the road and that is making some traders nervous," Edward Moya, senior market analyst at Oanda, said in a report, adding investors will now look for clarity about the economic recovery from Friday’s US non-farm payroll report.