Tech stocks are taking a beating this Monday. As the post-vaccine economy continues to take shape, investors are getting back into cyclicals. As a result, tech stocks are being put on the backburner. Of course, the asset class is not doing itself any favors thanks to supply chain shortages, outages and the like continuing to plague tech companies. With that, let’s dive in and try to find an answer to the question, “Why are tech stocks down today?”
Much of the day’s losses can be attributed to cyclical investing. Savvy investors are turning away from tech stocks largely because, right now, money is better found elsewhere. It certainly isn’t helping that the blue-chip S&P 500 index is continuing to give back the gains it has posted up to this point in the year. Continuing a tumultuous month, the index is currently down over 1.5% on the day’s session. Indeed, with the largest tech stocks making up over one-fifth of the S&P, a downturn for the index can spur bearishness across the entire sector.
Rather, interest is turning to other industries like manufacturing and transportation. The former is being bulked up in a big way. This is thanks to orders for U.S. manufactured goods coming out above estimates for the month of August. Per Yahoo Finance’s report, the increase comes from an influx of orders for things like machinery, semi trucks and the like.
Above all else though, the tech market isn’t resting easy as bond yields continue to inflate. As Barron’s reports, the 10-year Treasury yield is growing to 1.5%; this often translates to fears of incoming inflation.
Why Are Tech Stocks Down? Inflation Fears Are Up, Supply Chain Issues Aren’t Down
On top of inflation fear, there are a number of thorns in the side of the tech industry that still haven’t been pulled. Most glaringly, the industry is still facing supply chain issues, which have plagued it since the onset of the novel coronavirus pandemic.
Companies are rushing to up the production of microchips with big investments, like that of Intel (NASDAQ:INTC). However, these are medium-to-long-term solutions. For the time being, the tech industry is still saddled with the lack of semiconductors available, and many tech executives are sure that the shortage will continue through at least the next year.
The supply shortages will therefore continue to eat into company’s profits; they will have to pay extra due to increasing demand. Indeed, earnings will also take a hit by increasing Treasury yields as well. Historically, the market also tends to take a downturn through the months of September and October.
Facebook (NASDAQ:FB) stock is having a particularly bad day. On top of market sentiment around tech stocks generally growing more bearish, the company saw outages across its flagship platform as well as Instagram and others. FB is toting losses of 5.5% as a result of this fiasco.
Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) is continuing a week-long downturn with losses of nearly 2.5% so far today. Meanwhile, e-commerce giant Amazon (NASDAQ:AMZN) is also unable to escape losses. The company is down over 2.5% and falling into the red for the entire calendar year. Nvidia (NASDAQ:NVDA), one of the hardest-hit by chip shortages, is trading down 5%.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
