Today, stocks on the Nasdaq are trending lower on monetary policy concerns. Indeed, there’s a not-so-subtle rotation underway in the stock market this year. 2022 has been much more friendly to lower-valuation stocks, which are found in greater quantity in the Dow and S&P 500. For Nasdaq stocks, it’s been a tougher go this year, as investors attempt to manage portfolio risk and adjust for what appears to be a much less accommodative monetary policy environment.
Following the release of the Federal Open Market Committee (FOMC) minutes yesterday, Nasdaq stocks continued their selloff. This year, the Nasdaq has declined 12%, briefly moving into bear market territory in recent weeks. However, despite a recent rally, investors appear to remain cautious. For high-growth stocks in the Nasdaq, this could indicate more pain on the horizon.
Today, shares of Apple (NASDAQ:AAPL), Tesla (NASDAQ:TSLA), Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Meta Platforms (NASDAQ:FB) all trended downward in early afternoon trading. While these stocks are making a comeback as we near the end of the trading day, it’s clear sentiment isn’t what it once was for these stocks.
Let’s dive into what’s driving this bearish sentiment right now.
Why Are Nasdaq Stocks Down Today?
Much of today’s price action with Nasdaq stocks appears to be tied to concerns around monetary policy. Specifically, higher interest rates over the medium term could impact valuations of high-growth companies. The aforementioned four companies are among the big growth names in the tech space most investors watch closely.
Now, higher interest rates don’t affect these companies’ business models. Apple is still going to produce its iPhones. Alphabet and Meta Platforms will continue to dominate the digital ad space. And Tesla’s electric vehicles (EVs) remain the growth king in this sector.
However, higher interest rates do impact valuations for all companies. As rates rise, so too does the discount rate for these stocks. Investors may be worried about valuation concerns, as well as slower earnings, should the yield curve invert further.
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.
