Technology stocks are likely to continue to fall in value at the opening bell after investors became concerned that interest-rate hikes could hurt the sector.
Higher interest rates may make stocks, especially those with high growth, less attractive due to the squeezed valuation of earnings of present values.
The notion that the Fed’s balance sheet will be reduced at an accelerated pace when the Fed starts hiking rates is based on the idea that the Fed will reverse its QE program and sell off the assets it acquired through that program. Bonds also fell, though less drastically than earlier in the week, as the heavy selling occurred earlier.
The Federal Reserve’s latest meeting minutes sparked a sell-off in US stocks, with the S&P 500 closing down nearly 2 percent on Wednesday while the technology-heavy Nasdaq Composite was 3.3 percent lower. Short-dated US government bonds also sold off, with the two-year yield at 0.82.
The Fed’s meeting and Friday’s jobs report are likely to be the primary focus of Thursday’s trading session.
The availability of accessible monetary approaches pushed parties out of the risk curve, which led to increased risk-taking and instability in the markets.
The reduction of liquidity from the market can lead to a domino effect of hedging and deleveraging, leading to the fluctuation in all markets.