Stocks of tech giants Apple, Facebook, Google fell more than 3% on Friday with the sell-off continuing on Monday as well and spreading to Europe and Asia. But the slump has abated since then.
Why the drop?
While there was no distinct trigger, a multitude of factors led to the decline. These include concerns of dot com like bubble building up in the tech sector as investors pile onto these hot tech stocks, stock specific news on lagging data speed in Apple’s upcoming products and a Goldman Sachs report highlighting concerns on sustainability of outperformance of FAAMG (Facebook, Apple, Amazon, Microsoft, Google/ Alphabet) stocks.
How did the global markets react?
In Asia, Hong Kong, South Korea, and Taiwan (indices in these countries have heavy exposure to IT sector) were the most affected as tech stocks in Asia (eg. Tencent, AAC Technologies), responded to the sell-off in the US. European tech stocks (Apple suppliers, smartphone makers) also lost significantly. However, the rout has eased since then with stocks rebounding in Europe and Asia. US stock index futures are up too
Blip or downturn?
Given that the tech stocks have been a major driver of global market gains, an extended sell-off in the sector would have dented market sentiment. An easing of the rout indicates that the sell-off was perhaps more of a reversal of massive gains in tech stocks this year and market overreaction and not a sign of broader market weakness.
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