The Nasdaq Composite stock index suffered its biggest one-month selloff since the depths of the global financial crisis, as worries about rising interest rates and slowing economic growth were heightened by updates. softer commercial days from tech giants such as Amazon, Apple and Netflix.
The tech-dominated index fell 4.2% on Friday after lackluster results from Amazon and Apple the night before. The move took the Nasdaq’s fall in April to 13.3%, the worst monthly drop since October 2008, after the collapse of Lehman Brothers rocked financial markets.
The index has lost more than $5 billion in total market capitalization from its all-time high last November. Bank of America analysts on Friday called investor sentiment “simply awful.”
Apple, America’s most valuable company, reported higher-than-expected quarterly revenue on Thursday but warned that supply chain shortages and Chinese factory closures could cost it up to $8. billion in the second quarter.
Amazon, the online retailer and cloud computing group, blamed falling online sales and rising costs for its slowest quarterly revenue growth on record. Its shares fell 14% on Friday, while those of Apple fell 3.7%.
The announcements followed earlier failures by other tech giants such as Netflix and Google parent Alphabet. The high-profile disappointments weighed on the stock market despite a fairly positive earnings season among members of the broader S&P 500 stock index, underscoring the technology sector’s dominance over major US indexes.
The benchmark S&P 500 index fell 8.8% in April, including a 3.6% drop on Friday for its worst month since the start of the coronavirus pandemic in 2020.
According to FactSet, of more than 250 S&P components that reported first-quarter results, about 80% beat earnings forecasts. Amazon alone took the index’s earnings growth rate from just over 10% to 7.1% year-over-year.
Less tech-dominated European indices fared slightly better, with the Stoxx 600 index adding 0.7% on Friday and falling just 1.2% in the month.
“The dominance of the tech sector is an American phenomenon,” said Sonja Laud, chief investment officer at Legal & General Investment Management, pointing out that shares of Apple, Microsoft, Amazon, Tesla, Alphabet, Meta and Netflix accounted for nearly A quarter. of the S&P 500.
“The sector composition in Europe is very different,” she added, where markets “may do well thanks to rising commodity and energy prices.”
European markets were helped on Friday by hopes that Chinese authorities would take action to protect the world’s second-largest economy from further widespread coronavirus shutdowns.
The Communist Party’s decision-making body promised on Friday to “strengthen macro adjustments” and “achieve full-year economic and social development goals.”
“A lot of investors [in Europe] focus mainly on China, because China is really the engine of global growth and a lot of hopes are pinned on China pulling an ace up its sleeve” in terms of economic recovery, said Gregory Perdon, co- Investment Director at Arbuthnot Latham.
The euro rose 0.4% against the dollar to around $1.05, but remained near its lowest level in five years as traders expected the US Federal Reserve to rise faster than the European Central Bank interest rates to fight inflation. Markets are calling on the Fed to raise its main borrowing rate by half a percentage point when it meets next week.
The yield on the two-year US Treasury note, which closely tracks monetary policy expectations, rose 0.1 percentage point to 2.70% on Friday after strong data on consumer spending. “It really reinforces the idea that the Fed is going to have to make several 50 basis point hikes,” said Baylee Wakefield, multi-asset portfolio manager at Aviva Investors. Bond yields rise as their prices fall.