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A trader works on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Thursday, June 29, 2017.
This week kicked off with more bad news for tech stocks, dragging major U.S. indexes into correction territory and prompting one expert to compare them to a famed institution that has seen its own historic ups and downs.
“All these tech stocks in America or other parts of the world are a little bit like the British royal family,” said David Marsh, managing director at think tank the Official Monetary and Financial Institutions Forum (OMFIF). “You put them on a pedestal one day and they’re great … And you knock them off the next day.”
Indeed, the last year saw tech stocks, in particular the FAANGs — Facebook, Amazon, Apple, Netflix and Google — hit record highs. Now, amid growing fears of regulation and a number of companies hit by scandal, production problems, testing accidents or President Donald Trump’s Twitter ire, the much-vaunted sector is facing a mounting sell-off.
“It’s quite clear that some of these tech stocks got to stratospheric levels not justified by real life,” Marsh said. “And therefore whether it’s Mr. Trump or worry about some vehicle going off the road and killing people, there are lots of very justifiable reasons I think to sell. I think the correction has only just started.”
The S&P 500 and Nasdaq closed at their lowest levels in nearly two months Monday, while the Dow Jones was down 11 percent from its record highs. The S&P’s tech sector was down by 2.48 percent by the end of the trading day.
Heated tweets from the U.S. president targeted Amazon this weekend and sent shares down sharply, sparking concern over what measures the government might take on taxes and regulation. But prices were bound to drop regardless, Marsh told CNBC Tuesday, because the sky-high valuations of the previous year were simply unsustainable — and there may be further corrections to come.
