Wall Street’s new year hangover sends Big Tech stocks lower

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Wall Street stocks have begun the year with a technology-led hangover after the rally that ended 2023 turned cautious, sending tech stocks to their worst day in more than two months.

The Nasdaq Composite closed down 1.6 per cent for its weakest performance since October 26 while the blue-chip S&P 500 ended down 0.6 per cent — its poorest day in almost a fortnight.

Chipmakers and Apple headlined the tech fallers dragging the Nasdaq and the S&P lower. The consumer tech giant dropped 3.6 per cent for its weakest showing in almost four months after Barclays analysts downgraded it to the equivalent of a “sell” rating — only the company’s second such rating from analysts in at least two years.

Tuesday’s declines followed a year in which stocks defied early gloom to roar higher, pushing the S&P up nearly 25 per cent for 2023 — its third- best performance in the past decade — to within sight of a record high. 

Market optimism surged anew last month after the Federal Reserve surprised investors by signalling an end to its interest rate rises and hinting at potential cuts to come.

The S&P’s 4.4 per cent rally in December took its rise from its October low to 15 per cent. The strength of those gains prompted Tuesday’s caution, participants said. 

“It’s natural that after such an amazing rally we see the market taking a bit of a breath and reassessing the odds of a perfect soft-landing scenario,” said Amélie Derambure, senior multi-asset portfolio manager at Amundi. “We can’t have it all. It’s unlikely that we’ll have at the same time a perfect soft landing and a perfect disinflation momentum.”

Some also cited Monday’s earthquake in Japan and Middle East tensions boosting oil prices as reasons for the sell-off, although not all agreed.

While such factors “haven’t helped concerning this morning’s market picture, they wouldn’t account for such a large decline”, said analysts at Bespoke. “The more likely culprit is simply a round of profit-taking after a monster rally to close out 2023.”

Investors are also expecting fresh US data this week, including the minutes from the Fed’s critical December meeting, due on Wednesday, and monthly employment figures on Friday.

None of the so-called Magnificent Seven giant tech stocks that powered markets higher last year advanced on Tuesday. Microsoft, Meta, Amazon, Alphabet, Tesla and Nvidia all joined Apple in negative territory. Tesla was the least affected after reporting better than expected quarterly deliveries, and ended flat, down just 0.04 per cent.

Advanced Micro Devices led the big Nasdaq decliners, down 6.5 per cent, with fellow chip-related stocks also suffering. Intel was 5.5 per cent lower while ASML dropped 5.6 per cent.

The sector’s potential problems selling to the Chinese market was highlighted by a Bloomberg report on Monday that US authorities had put pressure on ASML to halt exports to China weeks before planned US bans were to come into effect.