Tech sell-off pushes Nasdaq to steepest drop since June 2020

Cloud companies, e-retailers and household tech names got hammered on Thursday, wiping out hundreds of billions of dollars in market value and pushing the Nasdaq Composite to its worst one-day plunge since June 2020.

A day after the Federal Reserve raised its benchmark interest rate by a half point in a bid to stem rising inflation, investors sold out of the part of the market that’s generally viewed as the growth driver, on concerns that the economy is in for some dark times ahead.

Big Techsuffered a massive sell-off, with Amazon dropping almost 8% and Facebook owner Meta Platforms off about 7%. Among other big names: Apple fell nearly 6%; Google parent Alphabet declined about 5%; and Microsoft shares slid 4%. Overall, the Nasdaq plummeted 5%.

Investors were particularly down on e-commerce after Shopify, which ballooned during the pandemic by helping physical retailers go digital, reported disappointing first-quarter earnings and revenue. The stock tumbled 15%. Ebay and Etsy also suffered double-digit drops following their earnings reports.

The rotation out of tech began in late 2021 as soaring inflation and the threat of rising rates led investors to areas of the economy deemed safer like energy and financial services. A further blow came with Russia’s invasion of Ukraine in February, which sent energy prices higher and heightened concerns about supply chain constraints and weakening business conditions in many parts of the world.

The first quarter of the year was the worst period for the Nasdaq since the same three months in 2020, when the early days of the pandemic spurred an economic shutdown. The tech-heavy index fell 9.1% during the first quarter. Less than halfway through the second quarter, the Nasdaq is now down 21% for the year.

Cloud stocks, which also became a favorite during Covid as corporations tapped services they could use remotely, were hit hard as well on Thursday. Bill-payment software developer Bill.com saw shares plunge 13%, while project management software company Asana’s stock fell 11%.

The WisdomTree Cloud Computing Fund was down nearly 8%, its steepest daily decline since September 2020.

For certain Covid winners like Netflix, Zoom, Peloton and Twilio, the reversal of fortune has been even more dramatic than the run-up. Each of them is down more than 45% year to date, and their slumps deepened Thursday.

The market initially responded positively to the Fed’s commentary on Wednesday, after Chair Jerome Powell said the Federal Open Market Committee wasn’t actively considering a rate hike any higher than a half point. However, the prospects of continued rate increases led to negative sentiment on Thursday, sending stocks down across the board.

WATCH: Cash is probably the safest place right now, says Barclays’ Deshpande