Wall Street in a panic

Cloud companies, e-retailers and well-known tech companies slumped on Thursday, wiping out hundreds of billions of dollars in market value and sending the Nasdaq Composite to its worst daily decline since June 2020.

A day after the US Federal Reserve raised interest rates by half a point to curb rising inflation, investors sold out of the part of the market widely seen as the engine of growth amid fears the economy was facing dark times imminent.

Big Tech suffered a massive sell-off, with Amazon down nearly 8% and Facebook owner Meta Platforms down about 7%. Among the other big names, Apple fell nearly 6%, Google parent Alphabet fell about 5%, and Microsoft stock fell 4%. Overall, the Nasdaq fell 5%.

Investors reacted particularly negatively to e-commerce after Shopify, which has experienced a huge boost during the pandemic by helping physical retailers make the switch to digital commerce, reported disappointing first-quarter results and sales. The stock plummeted 15%. Ebay and Etsy also had to accept double-digit price losses after their profit announcements.

The move away from the tech industry began in late 2021 as rising inflation and the threat of rising interest rates prompted investors to invest in safer areas of the economy such as energy and financial services. Another blow was Russia's invasion of Ukraine in February, which pushed up energy prices and heightened concerns about supply chain shortages and a slowing economy 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 first days of the pandemic led to economic shutdown. The tech-heavy index fell 9.1% in the first quarter. Less than halfway through the second quarter, the Nasdaq is now down 21% for the year.

Cloud stocks, which were also among the favorites during the Covid phase as companies turned to services they could use remotely, were also hit hard on Thursday. Shares in bill payment software developer Bill.com plunged 13%, while shares in project management software company Asana fell 11%.

The WisdomTree Cloud Computing Fund shed nearly 8%, posting its sharpest daily decline since September 2020.

For some Covid winners like Netflix, Zoom, Peloton and Twilio, the turnaround has been even more dramatic than the rise. Each of them is down more than 45% year to date, and their falls compounded on Thursday.

The market initially reacted positively to Federal Reserve comments on Wednesday, after Chair Jerome Powell said the Federal Open Market Committee was not actively considering a rate hike of more than a half-point. However, the prospect of further interest rate hikes fueled negative sentiment on Thursday and caused stock prices to fall across the board.