So-called “momentum stocks” such as Twitter and Facebook were hit with a huge sell-off at the end of the trading week in the US on Friday, as we noted this morning.
It was ugly, with LinkedIn down 13%, and Facebook and Twitter losing 5.4% and 8.8% respectively.
It’s all about risk aversion, and it looks like it’s spreading to Australia.
CMC Markets chief markets strategist Michael McCarthy explains that local tech stocks are down today, following last week’s leads from Wall Street.
“Dramatic losses in tech and bio-med stocks in US trading have reminded local investors of the dangers of stocks on high earnings multiples.
“IT companies Xero and iProperty are down 8-10%, and the sector is off more than 1% in an otherwise flat market. The downdraft is extending to internet based consumer stocks, with REA group shedding more than 5%.
The weakness in former market darlings is offset by an appetite for the dour and reliable. Property trusts and utilities are the best performing sectors as investors turn to reliable earnings streams and humbler multiples. Wesfarmers is driving a solid performance for consumer staples, rising more than 1% on confirmation of the $1 billion sale of its insurance arm.”
Here’s the Australian tech stocks taking a hit:
IT stocks hit:
- Altium – 3%
- Carsales -1.3%
- iProperty -9%
- Silex -0.5%
Internet-related stocks hit:
- Fox -2.5%
- Fairfax -3%
- Navitas -3%
- REA group -5%
- Seven Media -2%
The ASX200 closed down 0.17% today.
It’s important to note US stocks are close to all-time highs, and a lot of investors will be watching to see if this is the start of a broader risk aversion, or simply a brief period of jitters.
Here’s a whole-year chart for the big US tech stocks, from Arab Bank’s David Scutt:
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