Technology stocks lead the Nasdaq index significantly lower on Wall Street

Technology stocks took a fresh hit on Monday, with the Nasdaq closing more than 4 percent lower as investors dumped shares in family-name companies, fearing the prospects of slower growth, higher inflation and higher interest rates.

After posting its worst month since 2008 in April, the tech-heavy index continued to shrink, with many companies at risk of seeing their gains from the pre-pandemic stages, buoyed by the all-distance boom, wiped out.

The Nasdaq has shed more than a quarter of its value since the beginning of the year as pandemic favorites such as Peloton, Netflix and Amazon faced sharp sell-offs. Software company Palantir and electric car maker Rivian both lost more than 20 percent on the day.

The recent decline in the stock market is one of the many indicators that economists are watching closely as they try to predict the broader direction of the economy. At 3.6 percent, the unemployment rate is still very low, but growth slowed significantly and the economy actually contracted in the first three months of 2022. Tech companies led a broad market rebound soon after the pandemic began more than two years ago, but there was a reversal blatantly in recent months.

Tech companies saw sales swell early in the coronavirus pandemic as consumers accessed products and services that could keep them connected while isolated at home. Some companies cram five years of growth into two years. But now, as investors react to the prospect of a slowdown in the economy, big-name companies are also paying the price for higher inflation and the prospect of a recession.

If consumers cut back on spending, investors won’t know if streaming subscriptions, online shopping, and the latest smartphones and gadgets will fall off shopping lists.

“It’s a perfect storm for investors who have nowhere to hide with Fed rate hikes, inflation, geopolitical issues and recession fears,” said Dan Ives, managing director at Wedbush Securities. “Tech stocks are being crushed on this journey to safety, a bear market mentality while testing the pain threshold for tech investors.”

Apple kicked off 2022 to become the first $3 trillion company. But in just a few months, despite reporting record earnings last quarter, its share price has fallen more than 16 percent. Microsoft shares plunged 20 percent, sending its value down to less than $2 trillion. Amazon fell 5 percent on Monday and is down more than 35 percent over the year. (Amazon founder Jeff Bezos owns The Washington Post.) Meanwhile, Facebook is down 40 percent and has put hiring freezes on hold, which is seen as a kind of layoff in Silicon Valley.

The broader S&P 500 fell more than 3.2%, or more than 132 points, to a new low for 2022 after posting its longest streak of weekly losses since 2011.

The Dow Jones Industrial Average lost 653 points, or nearly 2 percent, piling more pain after the blue-chip index suffered its worst loss since the early days of the pandemic last week.

Cryptocurrencies, whose movements parallel the Nasdaq in recent months, have also fallen. After the temporary strengthening imposed by the Federal Reserve last week crossed $40,000, bitcoin trading is down nearly 9 percent on Monday at $31,512. Ethereum, another popular cryptocurrency, was down 9.3 percent at $2,323. Coinbase, the cryptocurrency trading platform, has seen its stock plummet by nearly 20 percent.

“The psychology of the market is driven by greed and fear,” said Wayne Wicker, chief investment officer at MissionSquare Retirement. “The volatility in the markets today is driven by uncertainty about the future rate of inflation and the actions the Federal Reserve will take in its attempt to muffle the price hike.”

After the initially rosy reaction to Wednesday’s Fed rate hike — the second of seven expected hikes for 2022 — investors were wringing their hands about the central bank’s approach to curbing inflation, which could make borrowing more expensive for businesses and households.

Federal Reserve officials are trying to raise interest rates at a pace that does not completely stifle economic growth, a balance that is difficult to achieve. If the economy cools down too quickly, it may fall into a recession, which is generally defined as two consecutive quarters of decline.

Investors seem to lack confidence that the central bank can walk the line to rein in inflation without causing a recession. Cboe’s VIX Index, otherwise known as “Wall Street’s Fear Barometer,” is up nearly 99.5% since the start of the year, according to MarketWatch.

“You have to seriously look for positive catalysts in the current market environment,” said Brian Price, Head of Investment Management at Commonwealth Financial Network. He said that although the outlook had become pessimistic, “any positive developments on the geopolitical front, or weaker than expected, will not be expected.” [consumer price index] The report, later this week, could help turn the tide and see investors embrace risky assets again.

Tyson Foods raised its full-year sales forecast as it reported earnings and revenue that beat analysts’ expectations on Monday, and its performance was weighed by price increases the company said it put in place to offset higher labor costs and inflation.

“Although we continue to see inflationary pressures across the supply chain, we are driving costs down by continuing to increase our efficiency and productivity and increase online capacity,” Tyson CEO Donny King said in the company’s earnings report. Shares jumped 2.2 percent.

In Asia, markets closed sharply lower as the weight of China’s zero-tolerance restrictions on the coronavirus continued to weigh on business activity in the region. Hong Kong’s Hang Seng Index closed 3.8 percent lower, while Japan’s Nikkei 225 Index lost 2.5 percent. The Shanghai Composite was roughly flat.

European markets closed in the red across the board, with the benchmark Stoxx 600 Index down 2.9 percent.

“The continuing impact of the non-proliferation policy in China and concerns about the Fed’s next moves are helping to increase pressure on the markets,” said Ross Mold, chief investment officer at AJ Bell. “The impact of the Chinese restrictions was reflected in export growth, which hit a two-year low in April – actually again where we were close to the start of the epidemic.”

Oil prices fell after Japan became the latest G7 country to ban Russian oil imports. Brent crude, the international oil standard, fell 6.5 percent to trade around $105 a barrel. West Texas Intermediate crude, the US benchmark, fell 6.8 percent to trade around $102.30 a barrel.

Anxiety permeated bond markets, pushing the yield on US 10-year Treasuries past 3.185 percent on Monday, the highest level since November 2018. Bond yields move inversely with prices.

Reed Albergotti contributed to this report.