Investors retreated from US stocks on Friday, dumping shares in large technology companies and sending the tech-heavy Nasdaq Composite index sharply lower.
The Nasdaq fell 2.4 per cent by early afternoon in New York, its biggest decline in more than two months, as a mixed US jobs report was seen as paving the way for more hawkish monetary policy, which would lead to tighter financial conditions and weigh on corporate valuations.
Etsy, Adobe and Tesla were all among the biggest losers on the day, falling more than 5 per cent. Facebook fell more than 2 per cent, taking losses from its recent peak in early September to over 20 per cent. The blue-chip S&P 500 index declined roughly 1.2 per cent.
The sharp declines marked a volatile end to a fortnight of trading characterised by big swings in prices across asset classes.
“I believe investors are now expecting monetary policy to get more hawkish, and that has historically put downward pressure on tech stocks,” said Kristina Hooper, chief global market strategist at Invesco.
The moves came after a report from the Bureau of Labor Statistics showed the US economy added just 210,000 new jobs last month, fewer than the 550,000 forecast by economists in a Refinitiv poll.
While the economy added fewer jobs than forecast last month, the unemployment rate still fell to its lowest since the pandemic began. “This was not a weak jobs report,” said Hooper.
For investors, the data has left the door open to a faster pace of policy tightening. Federal Reserve chair Jay Powell on Tuesday signalled his support for a quicker wind-down of the central bank’s $120bn-a-month of bond purchases. The programme has been a crucial pillar for the rally in equities prices since the depths of the coronavirus crisis last year.
Adding to the whipsaw movements across markets is a desire among fund managers to book profits heading into the end of the year and avoid suffering from the turn in sentiment.
“The prospect of a Fed that shifted from friend to foe so quickly is making some traders think it’s best to cash in and spend the weekend mulling future rate paths,” said Max Gokhman, chief investment officer at AlphaTrAI.
The yield on the 10-year US Treasury note fell by 0.07 percentage points to 1.37 per cent in early afternoon trading in New York. Bond yields move inversely to their prices.
Investors have been balancing a more hawkish Federal Reserve against emerging signs of slowing global growth and the potential for the Omicron coronavirus variant to derail the economy recovery.
Germany has moved to impose social curbs on unvaccinated people, and US president Joe Biden has announced measures to slow the spread of coronavirus, including tighter testing requirements for international travellers.
The Stoxx Europe 600 share index fell 0.6 per cent, after losing 1.2 per cent in the previous session. London’s FTSE 100 declined 0.1 per cent.
In Asia, Hong Kong’s Hang Seng index closed down about 0.1 per cent.
Shares in Chinese companies listed in New York also came under heavy pressure on Friday after ride-hailing app Didi announced plans to delist from the New York Stock Exchange and to prepare to go public in Hong Kong.
Didi’s shares dropped 17 per cent in US hours. JD.com, Baidu, and Pinduoduo all fell about 8 per cent, as did Alibaba.