Tech sell-off in US sends world stocks markets down

Nasdaq sell-off prompts fears of another technology meltdown

Mon, Apr 7, 2014, 15:47

US stocks fell again today, with the S&P 500 on track for its third straight decline, as weakness in some of the market’s recent high-flying names continued.

Biotech and Internet names were among the most pressured, extending recent losses that sent the Nasdaq and benchmark S&P index to their worst drop since February on Friday.

Yahoo fell 2 per cent to $33.58, Biogen lost 2.2 per cent to $282 and Gilead Sciences fell 1.3 per cent to $71.04.

The Dow Jones industrial average was down 4.67 points, or 0.03 percent, at 16,408.04. The Standard & Poor’s 500 Index was down 3.54 points, or 0.19 percent, at 1,861.55. The Nasdaq Composite Index was down 16.14 points, or 0.39 percent, at 4,111.58. Losses in the Dow were limited by Intel Corp, which rose 1.6 percent to $26.59.

The Nasdaq suffered its biggest decline since February on Friday as investors extended a recent sell-off in high-flying and high-growth shares, mostly in the tech and biotech sectors, on fears that they are overvalued.

The negative sentiment spilled into Asia today, hitting Japanese tech stocks. The pull-back came after the Dow and S&P 500 indexes hit record highs following March US jobs data that soothed concerns about the health of the economic recovery there but eased fears of an early interest rate hike.

World stocks, as measured by MSCI, had enjoyed three weeks of straight gains as easing tensions in the Crimea region of Ukraine encouraged investors to add risks. “Markets are overbought over the short term. We have seen a decent run after the Crimean situation cool down a little bit and now it’s quite natural to see a breather from that level,” said Gerhard Schwarz, head of equity strategy at Baader Bank.

The MSCI world equity index fell a third of a percent, having hit levels not seen since late 2007 on Friday. US stock futures were pointing to a weaker start on Wall Street later. Japan’s Nikkei fell 1.6 per cent, led lower by index heavyweight Softbank which fell over 4 per cent in brisk turnover.

SoftBank shares have become very sensitive to moves in US tech stocks ahead of Alibaba’s IPO, which is expected to become one of the largest offerings in history. SoftBank holds around a 37 percent stake in the Chinese e-commerce giant. European stocks were down around 0.8 per cent while emerging stocks outperformed with a decline of just 0.15 per cent following three weeks of gains. The dollar was slightly lower against a basket of six major currencies. The euro rose 0.1 percent to $1.3726.

Euro zone bonds rose broadly on expectations the ECB may undertake a programme of asset purchases, known as quantitative easing or QE, this year to support the economy.

Greek debt yields hit a four-year low and German and Italian bond futures rose, extending Friday’s rally after a German newspaper said the ECB had modelled the effects of buying a trillion euros of assets to ward off deflation.

That followed comments by ECB president Mario Draghi that policymakers were unanimous that asset purchases might be needed to tackle persistently low inflation. “Investors are just looking for yield pick-up with the ECB’s accommodative stance at this juncture,” RIA Capital Market strategist Nick Stamenkovic said. U.S. crude oil fell half a percent to $100.66 a barrel after worries about supply disruption eased as Libyan rebels occupying four eastern oil ports agreed to gradually end their eight-month-old blockade.

The 10-year US Treasury yield stood at 2.720 percent, having fallen on Friday after the jobs report eased concerns about an early interest rate hike. Short- and medium-term Treasury yields had surged after Fed chair Janet Yellen suggested on March 19th that the central bank could raise interest rates earlier than expected.

Dr Yellen was more dovish in a speech on March 31st, when she defended the Fed’s supportive measures. Short- and medium-dated US Treasuries notes are viewed as most vulnerable to a hike in overnight interest rates, which are currently near zero.