Market snapshot: will US tech stock slump accelerate?

Many household name tech stocks have suffered heavy losses. Here’s what our head of markets thinks.

The tech-inspired sell-off on Wall Street overnight was mainly the result of a bout of healthy profit taking.

Some disappointment following the ADP report on US jobs earlier in the week was compounded by an uncomfortably high jobless claims number yesterday, while the service sector rebound also slowed in August. Even so, the fact that there was no particular rush to haven assets like gold suggests that some sort of rebalancing was overdue.

Even after the overnight falls, the Dow Jones index is down just 0.9% in the year to date, while the S&P 500 remains comfortably ahead by 7%. The turbocharged tech performers of 2020 bore the brunt of the selling pressure, with the likes of Apple (NASDAQ:AAPL) down 8%, Tesla (NASDAQ:TSLA) 9%, Microsoft (NASDAQ:MSFT) 6% and Amazon.com (NASDAQ:AMZN) 5%. Despite these falls, the Nasdaq index remains on a tear, having risen by 28% in the year to date and by 73% since the March lows.

If the US economic recovery is running into some resistance, the widely-watched non-farm payrolls figure later today should provide some further colour. The consensus is that around 1.3 million new jobs were added in August, as compared to the figure of 1.8 million reported for July, which itself was ahead of expectations. Should consensus not be met, it is likely that calls for further fiscal stimulus from the US government will intensify, although any such stimulus is now becoming politically charged as the Presidential election campaign gathers pace.

Early indications show some nervousness ahead of the jobs report, with Dow Futures currently drifting slightly lower and other concerns in the background, such as teetering relations between the US and China. Of immediate concern, however, is whether the gap between Wall Street and Main Street continues to grow, as the economic data shows some signs of stalling after an initial rebound following the pandemic.

The state of the world’s largest economy inevitably impacts on market sentiment generally, and the FTSE 100 index has not escaped this caution. Today’s weakness brings the year to date performance of the premier index to being down 23%. The lack of risk appetite ahead of the non-farms likely to further weigh on an index which has seen negligible benefit from the generally positive performance of markets across the pond, yet which seemingly tracks most of the downside.