US tech stocks fall ahead of inflation data

U.S. tech stocks fell on Monday as investors braced for further signs of mounting inflationary pressures in the world’s largest economy.

The blue-chip S&P 500 closed 1% lower, while the tech-focused Nasdaq Composite broke a two-day winning streak to slide 2.6%.

US government bonds joined the sell off, pushing up longer-term yields. The benchmark 10-year Treasury bill traded at 1.6%, an increase of around 0.03 percentage point on the day.

Analysts expect data on Wednesday to show that US aggregate prices rose 3.6 percent in April from the same period last year. Exit prices from Chinese factories, an early indicator of price pressures for importers in the west, are expected to have jumped more than 6% in a report to be released on Tuesday.

Data released Monday by the New York branch of the US central bank highlighted that consumers were also hoping for higher prices. According to a recent survey, median inflation expectations for the coming year sharp to 3.4% in April, the highest level since September 2013.

Market measures of inflation expectations have also increased. A popular gauge, the five-year break-even rate, hit its highest level in about 15 years on Monday, above 2.7%.

The Fed has promised to stay relaxed about inflation above its 2% target as the US economy recovers from the pandemic. The central bank has indicated that it has no plans to cut its $ 120 billion monthly bond purchases, which have limited Treasury yields, which influence borrowing costs around the world .

But analysts remain concerned that several months of high inflation will hit bond prices and therefore push yields higher. Rising bond yields depress valuations of stocks, especially long-term growth stocks in the tech sector that do not pay generous dividends.

“Will inflation lead to a bear market for bonds and a technological sell-off?” This is the key market narrative at the moment, ”said Gregory Perdon, Co-Director of Investments at Arbuthnot Latham.

“The Fed can say inflation is transient as long as economies reopen. . . This line starts to become obsolete when large economies like the United States are completely reopened and we still have an inflationary push.

“One school of thought is that the reflation will be orderly and benign,” said Yuko Takano, portfolio manager at Newton Investment Management, while “you have another camp that sees US inflation reaching 4 or 5 percent, this which could get very messy for markets ”.

Tech stocks have also been the winners in the pandemic, and some analysts suspect it will be difficult for them to maintain their current levels of earnings growth as the lockdowns ease.

The Nasdaq rallied peaked last month as its biggest companies reported strong first quarter results. On Monday, Citigroup downgraded its rating on Facebook and shares of parent company Google Alphabet to neutral, saying “growth will likely slow” from the second quarter of this year. Shares of Facebook fell 4.1% on Monday and those of Alphabet fell 2.6%.

“Another cloud over the tech sector is US tax reform,” said Marco Pirondini, head of US equities at Amundi. US President Joe Biden is pushing for a minimum global corporate tax rate to prevent multinationals from channeling their profits to low-tax jurisdictions, in a move that threat the business models of the world’s largest technology companies.

The dollar index, which measures the US currency against the currencies of a group of trading partners, fell 0.1%. The index has fallen 0.8% since a Friday report showed the United States created a much weaker than expected 266,000 new jobs in April.

The British pound rose 1% to $ 1.41, following the victories of the British Conservative Party in local elections and the expected announcement of new coronavirus restrictions. survey May 17.

The Chinese renminbi, guided by the country’s central bank, hit a three-year high of 6.41 per dollar.

Elsewhere, Brent futures hovered around $ 68.23 per barrel. The European stock index Stoxx 600 ended the session up 0.1 percent.

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *