Chinese tech stocks tumble set to drag wall street lower

Chinese tech stocks tumble set to drag wall street lower

Stocks dipped on Thursday, as the renewed pandemic wave may delay the economic recovery, while the latest sell-off of Chinese big technology stocks has spilled across markets. 

The S&P 500, Dow, and Nasdaq each pared losses after dropping by more than 1% at intraday lows. Thursday’s session marked the first time since June that the S&P 500 opened lower by more than 1%. 

A day earlier, the blue-chip index rose to a record closing high for the eighth time in the last nine sessions as concerns over a near-term monetary policy adjustment and sustainably high inflation abated. 

The benchmark 10-year Treasury yield sank further to hover around 1.29%, with the dip in rates reflecting both easing inflation expectations but also uncertainty over the sustainability of the recovery. 

The FAANG group, whose value rests heavily on future earnings, dropped between 0.7% and 1.3%. It had sent the Nasdaq and S&P 500 to record highs in the previous session.

Chinese ride-hailing giant Didi Global Inc, which has been at the centre of a selloff after its app was taken down by Beijing, fell 5.6%.

Other US-listed Chinese stocks fell, tracking steep losses in China and Hong Kong, with e-commerce giant Alibaba Group Holding Ltd falling 3.7% and internet search engine Baidu Inc down 3.9%.

The two Chinese tech giants have declined nearly 8% and 10.4% respectively this week, underperforming the broader NYSE FANG+TM index, which has fallen only 2.9% so far in the same period.

The CBOE Volatility index, a gauge for investor anxiety, earlier jumped to its highest level in over two weeks.

Investors also awaited the start of second-quarter earnings, with big lenders kicking off the season next week.

Declining issues outnumbered advancers for a 2.79-to-1 ratio on the NYSE and for a 2.11-to-1 ratio on the Nasdaq.

The S&P index recorded 14 new 52-week highs and no new lows, while the Nasdaq recorded 26 new highs and 142 new lows.

Damon Harrison
Market Analyst, IPG Group