With concerns that technology companies can face more regulation, tech stocks were declining all over the globe — with the tech-heavy Nasdaq falling 2.9 percent Tuesday (March 27).
According to The Wall Street Journal, on Wednesday (March 28) the Stoxx Europe 600 was trading down in mid-morning action while in Asia tech stocks brought markets in the region lower. Meanwhile, futures pointed to more declines in the S&P 500 when the U.S. markets open. The S&P 500 ended Tuesday's (March 27) trading session down 1.7 percent. FAANG stocks, which include Facebook, Amazon, Apple, Netflix and Alphabet, the parent of Google, have lost more than $260 billion in market value during the past little more than a week after Facebook disclosed a new data scandal. That has led to concerns that more regulation of the entire tech sector is coming. Aberdeen Standard Investments senior investment manager James Athey told The Wall Street Journal that the sell-off has to do with the prospects for more regulation, which has created jittery markets around the globe.
More than a week ago Facebook revealed that Cambridge Analytica, the political consulting company that worked on President Donald Trump’s election campaign, accessed the data of 50 million Facebook users without their consent. That has spurred investigations into the matter by regulators and lawmakers in the U.S. and U.K. and is leading to the worries about increased regulation. Mark Zuckerberg, Facebook’s CEO, agreed to appear before Congress, with many thinking that will lead to testimony by the CEOs of the likes of Google and Twitter.
In addition to the prospect of more regulation, some Wall Street watchers pointed to lofty valuations for tech stocks that had to come down. “We see this [selloff] continuing, either with U.S. tech stocks underperforming a rising equity market or weakening materially if risk aversion remains high,” UniCredit said, according to the WSJ. Meanwhile, J.P. Morgan Asset Management lowered its “significant overweight” position in tech stocks, moving more to financial stocks, Ayaz Ebrahim, portfolio manager for emerging markets in Asia-Pacific told the WSJ. Despite the sell-off in tech stocks — the darling of the stock market just a few weeks ago — investors are still positive about the remainder of 2018 thanks to strong economic growth around the globe.