Tech selloff puts Nasdaq on pace for worst day since June 2020

Cloud companies, e-retailers and household tech names got hammered on Thursday, wiping out hundreds of billions of dollars in market value and pushing the Nasdaq Composite toward its worst one-day plunge since June 2020.

A day after the Federal Reserved raised its benchmark interest rate by half a point to try and combat inflation, investors sold out of the part of the market that’s generally viewed as the growth driver, on concerns that the economy is in for some dark times.

Big Tech suffered a massive selloff. Amazon and Facebook owner Meta owner each dropped 7%. Google parent Alphabet, Microsoft and Apple all fell about 5%. The Nasdaq plummeted 5.1% as of early afternoon New York time.

Investors were particularly down on e-commerce after Shopify, which ballooned during the pandemic by helping physical retailers go digital, reported disappointing first-quarter earnings and revenue. The stock tumbled 15%. Ebay and Etsy also suffered double-digit drops following their earnings reports.

The rotation out of tech began in late 2021 as soaring inflation and the threat of rising rates led investors to areas of the economy deemed safer like energy and financial services. Then came Russia’s invasion of Ukraine in February, which further lifted oil prices and heightened concerns about supply chain constraints and weakening business conditions in many parts of the world.

The first quarter of this year was the worst period for the Nasdaq since the same period in 2020, when the early days of the pandemic led to an economic shutdown. The tech-heavy index fell 9.1% in the first three months of the year. Less than halfway through the second quarter, the Nasdaq is already down another 13%.

Cloud stocks, which also became a favorite during Covid as corporations tapped services they could use remotely, were hit hard as well on Thursday. Bill-payment software developer Bill.com saw shares drop by 12%, while project management software company Asana’s stock fell by about the same amount.

The WisdomTree Cloud Computing Fund was down 7.9%, which would make Thursday the steepest decline since September 2020.

For certain Covid winners like Netflix, Zoom, Peloton and Twilio, the reversal of fortune has been even more dramatic than the runup. They’re each down more than 60% over the past year, and their slumps continued along with the rest of the market on Thursday.

The market initially responded positively to the Fed’s commentary on Wednesday, after Chairman Jerome Powell said the central bank’s Federal Open Market Committee wasn’t actively considering a rate hike any higher than half a point. However, the prospects of continued rate increases led to negative sentiment on Thursday, sending stocks down across the board.

WATCH: Cash is probably the safest place right now, says Barclays’ Deshpande