Wall Street stocks slide as tech jitters return

Stay informed with free updates

Simply sign up to the US equities myFT Digest — delivered directly to your inbox.

Tech shares led a slide on Wall Street on Thursday as rising concerns about the state of the world’s biggest economy and the path of US interest rates sparked a fresh bout of investor jitters over highly valued stocks.

The tech-heavy Nasdaq Composite dropped 2.4 per cent by afternoon in New York and the S&P 500 was down 1.5 per cent.

The declines came a day after US President Donald Trump brought an end to the longest US federal government shutdown, which had deprived investors of vital economic data just as concerns about the state of the labour market had begun to intensify.

However, the White House has said inflation numbers and jobs data for October will not be released. In the absence of key figures, Federal Reserve chair Jay Powell last month warned a December interest rate cut was “far from” a foregone conclusion.

Boston Fed president Susan Collins on Wednesday cast further doubt on a rate cut next month, arguing there was “a relatively high bar for additional easing in the near term”.

Investors are pricing in a roughly 50 per cent chance that the Fed lowers rates when it meets next month. A quarter-point cut had been fully priced in by the market as recently as three weeks ago.

The market was “maybe a bit ahead of its skis” on expectations for Fed cuts, said Raphaël Thuin, head of capital markets strategies at Tikehau Capital.

Investors have at the same time become increasingly nervous about the sky-high valuations of some of the US tech giants that have fuelled this year’s rally for the S&P 500.

Paul Dalton, investment director for equities at Federated Hermes Limited, said: “Ambiguity around the true US economic picture, and key risks persist — including the strength of the US consumer and debate over whether the [artificial intelligence] trade is a bubble.”

Concerns that market valuations had become unhinged from fundamentals helped prompt investor Michael Burry, known for his bet against the US housing market ahead of the 2008 financial crisis, to announce he would close his hedge fund Scion Asset Management.

“My estimation of value in securities is not now, and has not been for some time, in sync with the markets,” he said in a letter to investors, dated October 27.

Tech shares that have pushed the US stock market to record highs in recent months bore the brunt of investors’ risk-off trades on Thursday, with Nvidia, Broadcom and Intel all down more than 4 per cent.

Retail brokerage Robinhood and Elon Musk’s electric-car company Tesla both fell more than 7 per cent, while defence contractor Palantir shed 5.5 per cent.

Concerns about Silicon Valley’s huge spending on data centres have begun to spill over into debt markets, with a basket of bonds issued by companies including Alphabet, Meta, Microsoft and Oracle having taken a hit in recent weeks.

Kevin Gordon, head of macro research at Charles Schwab, said: “It’s part of the digestion process the market has been going through . . . where this year’s leaders are taking a step back while the rest of the market catches up.”

“Segments of the market that are more richly valued tend to be hit hardest at first whenever skittishness around stretched multiples starts to creep back in,” he added.

US government debt also sold off on Thursday as equities slipped, with the yield on the 10-year US Treasury, which moves inversely to the price, rising 0.03 percentage points to 4.1 per cent.

In currency markets, the dollar slipped 0.4 per cent against a basket of other currencies.

Additional reporting by Ian Smith in London