US tech stocks hammered after Yellen rate comment

A trader works at the New York Stock Exchange. Tech stocks slumped in US trading yesterday. — Reuters pic
A trader works at the New York Stock Exchange. Tech stocks slumped in US trading yesterday. — Reuters pic

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NEW YORK, May 5 ― Tech stocks slumped in US trading yesterday, after Treasury Secretary Janet Yellen made comments viewed as warning that higher lending rates could be coming.

Interest rates that the Fed lowered to zero last year as the Covid-19 pandemic began spurred a rally in US equities of which tech firms were some of the prime beneficiaries.

Though the economy is recovering, the central bank is not currently expected to lift rates until at least 2024.

But with President Joe Biden proposing nearly US$4 trillion (RM16.5 trillion) in long-term investments in infrastructure and families in addition to a US$1.9 trillion pandemic relief measure enacted in March, “it may be that interest rates will have to rise somewhat to make sure that our economy doesn't overheat,” Yellen said.

It was not what markets wanted to hear, and the Nasdaq, which was already trading lower, fell further “as investors assess a sell-off in big tech shares and interest rate comments from... Yellen,” Wells Fargo Advisors said.

The tech-rich Nasdaq Composite Index closed 1.9 per cent lower at 13,633.50, its worst performance since March 24.

The broad-based S&P 500 fell 0.7 per cent to 4,164.66 at the end of US trading, while the benchmark Dow Jones Industrial Average managed a slight 0.1 per cent gain to 34,133.03.

Apple closed 3.5 per cent lower, Microsoft lost 1.6 per cent and Facebook shed 1.3 per cent.

Markets are looking ahead to a series of employment data to be released in the coming days, starting with ADP's April private sector hiring report coming today.

That will be followed by last week's new filings for unemployment benefits from the Labor Department, then the April employment report that will tell how many jobs the US economy added last month and update the unemployment rate.

Before markets opened, the Commerce Department said the trade deficit widened in March by 5.6 per cent to US$74.4 billion, an all-time high.― AFP

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