Tech stocks have moved broadly lower today, as investors were dreading the upcoming release of the Federal Reserve minutes following the last Federal Open Market Committee (FOMC) meeting. Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Meta Platforms (NASDAQ:FB), Alphabet (NASDAQ:GOOGL) and Nvidia (NASDAQ:NVDA) were all down meaningfully in early afternoon trading.
This price action today is hardly surprising. After all, most investors expected to see a more hawkish tone coming from these minutes. And as most investors know, rising interest rates are generally bad news for tech stocks. That’s because growth companies with higher-than-average top-line growth rates tend to have future earnings discounted to a greater degree in a rising rate environment. Valuation compression can be a big negative for highly valued companies.
Indeed, there were some comments in the latest minutes release that did pique investors’ interest. Let’s dive into what the market is watching with these top tech stocks right now.
Trepidation Around Fed Meeting Minutes Sinks Tech Stocks
Investors were already wary of what they’d find in this latest round of meeting minutes from the recent FOMC meeting. Much of what was released may already have been priced into the stock market. For example, the Fed indicated that bond holdings would be diminished at a maximum pace of $95 billion per month. This is significantly faster than the previous tightening cycle, which involved $50 billion per month in 2017 and 2018.
However, the number of participants that indicated they would prefer to raise interest rates by 50 basis points this upcoming meeting have increased. With the next meeting approximately one month away (May 3-4), the market appears willing to get ahead of what could be a hike of 50 bps.
If that wasn’t enough, expectations of additional 50 basis point hikes appears to be increasing. While the Russian invasion of Ukraine provided pause on such a hike at this last meeting, it appears a more aggressive stance is in view. Accordingly, tech stocks appear to be taking a breather. How long of a breather remains to be seen.
On the date of publication, Chris MacDonald 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.
