Wall Street tumbles on tech sector, trade war worries

NEW YORK - Wall Street shares plunged on Monday as investors fled technology stocks amid resurgent trade war worries, with key indexes trading below their 200-day moving averages and the S&P 500 closing below that pivotal technical level for the first time since Britain's vote to leave the European Union in June 2016.

The first trading day of the second quarter began with a broad selloff concentrated in the technology and consumer discretionary sectors, as losses by Amazon.com, Tesla and Microsoft, among others, took center stage from retaliatory trade measures China unveiled on Sunday.

With the S&P 500 in a 10 percent correction from its record high in late January, investors were increasingly concerned a nine-year bull market might be in danger of ending.

"It’s more complicated than just a tech selloff. What's hurting everything is that the S&P went through its 200-day moving average," said Brian Battle, director of trading at Performance Trust Capital Partners in Chicago. "That attracts momentum sellers and they don't care what the fundamentals are."

The Dow Jones Industrial Average fell 458.92 points, or 1.9 percent, to end at 23,644.19 after dipping below its 200-day moving average. The S&P 500 fell 58.99 points, or 2.23 percent, to 2,581.88 and the Nasdaq Composite dropped 193.33 points, or 2.74 percent, to 6,870.12.

Amazon.com was the biggest drag on the S&P 500, down 5.2 percent, as President Donald Trump continued his twitter attacks on the online retailer.

All 11 major sectors of the S&P 500 closed lower, with the biggest losses seen by the consumer discretionary and technology indexes, which were down 2.8 percent and 2.5 percent, respectively.

The tech-heavy Nasdaq was dragged lower by Microsoft, Intel, Apple Inc, Facebook and Alphabet.

Shares of Tesla Inc ended the day down 5.1 percent after the company was reported to be making 2,000 Model 3s per week, missing its 2,500 target.

The electric automaker's losses extend last week's near 14-percent decline as investigations of a fatal California crash and a Moody's credit downgrade weighed on the stock.

Health insurer Humana Inc's shares closed up 4.4 percent on news it was in talks with Walmart to expand their partnership or possibly be acquired by the retailer. Walmart stock fell 3.8 percent.

US Treasury yields fell to two-month lows as investors fled sliding stocks for safety ahead of Friday's closely watched jobs report.

Declining issues outnumbered advancing ones on the NYSE by a 4.17-to-1 ratio; on Nasdaq, a 4.14-to-1 ratio favored decliners.

Volume on US exchanges was 7.71 billion shares, compared to the 7.29 billion average over the last 20 trading days. 

source: news.abs-cbn.com

Heady days for tech sector 15 years after bubble burst

Heady days for tech sector 15 years after bubble burst
NEW YORK - Fifteen years after the bursting of the dot-com bubble, the tech sector is flying high again, with record amounts of cash pouring in, and renewed fears about inflated valuations.

A survey by the EY (formerly Ernst & Young) group counted 3,512 mergers or acquisitions in the tech sector in 2014, for a total value of $237.6 billion, the highest figure since 2000.

The report said the outlook for deals in 2015 remains "robust."

There are no signs the trend is slowing.

"Tech investment bankers have told us that their pipelines are fuller than they've been in years, while corporate development executives indicated they expect to be even busier shopping this year," said Brenon Daly, analyst at 451 Research.

The 451 Research report suggests more dealmaking is coming in hot segments such as mobile tech, security and cloud computing.

Startups like Uber and Snapchat meanwhile have seen their values soar with new capital inflows.

Thirty-eight tech companies entered the billion-dollar club clast year, including 25 in the US, according to the research group CB Insights which tracks venture capital.

Part of the euphoria around the sector also comes from giants like Apple, which broke all records with an $18-billion profit in the past quarter, and Chinese online group Alibaba, which raised a record $25 billion in its initial public offering.

The consultancy PwC said 2014 was the "best year of the decade for global technology IPOs."

A question of value

The key question for investors in the sector is whether the sky-high valuations are indications of innovative companies with tremendous growth prospects or mere speculation.

Uber's investment valued the ride-sharing service at $41 billion; home-sharing service Airbnb's worth is estimated at $10 billion, a similar level to that of Snapchat and Dropbox; and streaming music group Spotify at $7 billion.

These investments come in the wake of Facebook's $22 billion deal to buy the messaging service WhatsApp.

"The valuations are way out of line," said Roger Kay at Endpoint Technologies Associates.

Still, Kay noted that "the mood is different because people do remember 2000. In 2000 they really thought it would never end, and it was sort of pure bubble euphoria. This time euphoria is tempered with a bit of cynicism."

'Reality-based'

The EY report says however that this time, values are grounded in reality.

"Unlike 2000, it was no bubble," the report said. "Despite the occasional 'moonshot' from a handful of deep-pocketed buyers, the vast majority of deals were measured in reality-based multiples of good-old-fashioned revenue, profit or cash flow."

Some analysts point out that the Nasdaq stock market index, seen as an indicator of the tech sector, still has not returned to its record high of 5,100 hit in March of 2000.

Michael Stiller, tech analyst with Nasdaq’s Advisory Services unit, said the tech sector "generally is still considerably cheaper than in 1999" and that the companies have more realistic business models.

"It's a totally different environment," Stiller told AFP.

"We now have three billion people online versus 400 million in 2000, a 7.5-fold increase. So many of the ideas that were conceived in 2000 are now feasible as the market is eight times as big relative to 15 years ago."

Stiller noted that while some tech companies look expensive, these companies have become more mature, and are getting real revenues and profits.

"Large cap tech companies are flush with cash and it flows down to other parts of the sector," he said.

"Real earnings from tech companies are actually in the books, not just metrics like eyeballs and page views."

source: www.abs-cbnnews.com