Market snapshot: tech stocks lead US markets lower

by Richard Hunter from interactive investor |

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Indices turned tail after comments from the Federal Reserve and Treasury, while China tension is unhelpful.

Market progress is being held back by a combination of concerns ranging from European lockdowns to uncertainty on tax policies, with an added dose of inflationary worries persisting.

Despite positive comments from both the Federal Reserve Chairman and the US Treasury Secretary, the main indices in the US were unable to hold on to gains. The Fed maintained its position that inflationary pressures would be temporary, partly based on the low comparatives of March and April last year, but also that the expected surge in consumer spending as pent-up demand is released would also be relatively short-lived.

The brittle relationship between the world’s two largest economies was again underlined as US regulators plan to introduce stronger listing requirements which could result in the delisting of many Chinese companies. After some recent politically-driven mutual sanctions, the issue is one which could accelerate as general coronavirus concerns recede later in the year.

The rotation into sectors most likely to benefit from economic recovery also continued to the detriment of the previously sought-after high growth, big tech stocks. The Nasdaq had a weak trading session - down 2% - and now stands ahead by just 0.6% in the year to date, while the Dow Jones has added 5.9% and the S&P 500 3.5%.

The US dollar also showed some strength as the uncertain pace of vaccine rollouts in Europe rattled the euro, as well as the extended lockdowns being implemented in some countries across the continent. 

Potentially overdone hopes of a strong return of demand are also weighing on the oil price, which remains ahead by 23% so far this year but off its highs, with the Suez Canal blockage providing a temporary sideshow.

The combination of these global factors has also hamstrung the UK market. Sentiment generally is currently seeking fresh direction, while the vaccine rollout success thus far could be impeded by further supply restrictions.

The FTSE 100 index has, nonetheless, maintained its steady progress and remains ahead by 3.5% in the year to date. In the event of a marked improvement in risk appetite for investors, the UK could yet be one of the first ports of call on valuation grounds alone.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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