Tech rout pushes Nasdaq to lowest close since 2014

Facebook dropped 5.8% to $104.07 while Alphabet fell 3.6% to $703.76

The Nasdaq Composite that includes large-cap technology names like Alphabet, Microsoft and Facebook led another broad rout on Wall Street Friday, closing at its lowest level since October 2014.

Many stocks that had led on the way up in 2015 led the way down this week. Recent earnings and economic reports, including a tepid jobs report, seemed to confirm investors’ fear that the economy, and corporate spending, are slowing.

Dismal sales forecasts from marquee technology names sent some high-profile shares crashing as investors questioned whether information-technology managers would keep spending on their products. LinkedIn dropped 43.6 per cent to $108.38 after a weak forecast, and business analytics company Tableau Software lost almost half its value.

Facebook dropped 5.8 per cent to $104.07 while Alphabet fell 3.6 per cent to $703.76.

Among consumer discretionary companies, Amazon slid 6.4 per cent and Netflix was down 7.7 per cent. Both had more than doubled last year and have been favourites with hedge funds. Friday’s action suggests some hedge funds may be taking a harder look at valuations.

“There’s a lot of portfolio de-risking going on and high valuation securities are often the first to be sold. It’s also the securities that have done extremely well,” said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York.

“It’s a valuation call and it shows concern for the overall market.”

The Dow Jones industrial average fell 211.61 points, or 1.29 per cent, to 16,204.97, the S&P 500 lost 35.4 points, or 1.85 per cent, to 1,880.05 and the Nasdaq Composite closed down 146.42 points, or 3.25 per cent, to 4,363.14.

All three main indexes closed lower for the week, even though the week included one session with a solid rally — as did last week. The Dow fell 1.6 per cent this week, the S&P 500 shed 3.1 per cent and the Nasdaq fell the most, 5.4 per cent.

US stocks are trading above the lows hit during the January rout, but bulls have failed to gain traction, with many rallies evaporating before the close.

The CBOE Volatility Index, Wall Street’s gauge of anxiety, rose 7.1 per cent to 23.38, and trading in the index’s options suggests few expect volatility to subside in a hurry.

A softening US economy has many on edge. Friday’s January jobs report showed nonfarm payrolls increased by 151,000, below the 190,000 expected. But strong wage growth and falling unemployment suggested a March interest rate increase could not be ruled out.

Stocks’ close correlation with oil prices continued.

US crude settled down 2.6 per cent.

About 9.4 billion shares changed hands on US exchanges, matching the daily average for the past 20 trading days, according to Thomson Reuters data.

Declining issues outnumbered advancing ones on the NYSE by 2,330 to 720, for a 3.24-to-1 ratio on the downside; on the Nasdaq, 2,288 issues fell and 509 advanced for a 4.50-to-1 ratio favouring decliners.

The S&P 500 posted 7 new 52-week highs and 26 new lows; the Nasdaq recorded 3 new highs and 195 new lows.