The continuing collapse in growth stocks deepened before Friday’s market as investors dumped shares of high-tech companies and sought refuge in companies that could take advantage of rising commodity prices.
Companies that were once favorites of the pandemic fell before the bell began.
Peloton Interactive Inc. sank 1.4%, Zoom Video Communications Inc. fell 0.8%, Wayfair Inc. losses of 0.4%. Mega-cap technology companies were also not spared, as investors gave up shares of Alphabet, the mother of Google, Facebook, Meta Platforms Inc., and Microsoft Corp., all of which fell by at least 0.4%.
This year’s market volatility has forced investors to aggressively cancel pandemic-era bets as money managers struggle with the impact of higher interest rates. When bond yields rise, it reduces the attractiveness of stocks whose profits are expected to come far into the future.
Many investors have switched to companies that will benefit from this year’s boom in raw materials. This dynamic was shown again on Friday. Early pre-market winners include Marathon Oil Corp. and steelmaker Nucor Corp., both up more than 1.5%.
A team of Deutsche Bank strategists led by Jim Reed, head of case studies, attributed the instability on Thursday to growing investor awareness that the Federal Reserve is unlikely to be able to come to market aid, according to a research note Friday. In times of turmoil, some investors have to expect what is known as the Fed put, or the Fed’s tendency to cut interest rates or hold back interest rates in response to market turmoil.
“I can’t help but think that much of the reaction yesterday was to the assessment that while the Fed can make reassuring statements, they start from an extremely difficult starting point and with limited flexibility to respond to market or economic concerns as they struggle. with inflation, “the note said.
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