FB, AMZN, NVDA, AAPL, COIN: Why are tech stocks falling today?
It really is an interesting time to be an investor. Today, with tech stocks falling again, investors are wondering what the future might hold for the broader market in 2022 and beyond. Admittedly, this market recovery after the pandemic has been bumpy. However, one thing most investors agree on is the main catalyst for the stock market appreciation we’ve seen in recent times – an unprecedented monetary policy stimulus.
Today’s popular mega-cap stocks Meta-platforms (NASDAQ:FB), Nvidia (NASDAQ:NVDA), Apple (NASDAQ:AAPL) and Coinbase (NASDAQ:PIECE OF MONEY) each fell, suggesting that this market liquidation could be blind. So far, these mega-cap stocks have held up relatively well. However, market concerns about inflation and the potential for rising interest rates have hit tech stocks hard. Most small to mid-cap tech stocks have seen massive declines in recent trading days. This followed reports from the minutes of the recent Federal Reserve meeting, suggesting that rate hikes could take place as early as March, with a more aggressive approach taken to shrink the Fed’s balance sheet in the near term.
Against this background, let’s take a look at what explains the current decline in tech stocks.
Why are tech stocks falling today?
The second week of 2022 has started with a flurry of activity. Today, a key report from Goldman Sachs (NYSE:SG) highlighted a new projection of rate hikes this year. Unfortunately, this projection is bearish for those who believe that easy monetary policies will not go away so easily.
The Goldman Sachs report suggests the Fed could hike rates four times this year, instead of the three hikes previously planned for 2022. The updated forecast stumbled most of the big tech stocks today as investors looked to reduce the risks of their portfolios.
Generally speaking, higher interest rates are bearish for most high growth stocks. Companies with a significant percentage of their future cash flow from longer-term projected growth are hit harder when those cash flows are discounted to the present day using a higher discount rate. Rising inflation concerns and a weaker-than-expected labor market were the catalysts for this updated projection.
Currently, it appears that investors are taking a more cautious approach to stocks today. Indeed, that has been the case for much of the past week. Will it continue? Time will tell us. However, as of now, there’s little appetite for buying the dip – something we haven’t seen in quite some time.
As of the publication date, Chris MacDonald does not have (directly or indirectly) any position in any of the stocks mentioned in this article. The opinions expressed in this article are those of the author, subject to the publication guidelines of InvestorPlace.com.