The tech turmoil is deepening.
The Nasdaq plunged 3.5% on Friday — and Amazon is leading the way lower. Amazon (AMZN) shares plummeted 9% after reporting disappointing sales and guidance. Google owner Alphabet also fell sharply on weaker-than-expected revenue.
The tech selling spread to the Dow, which fell 500 points, or 2%. The S&P 500 declined 2.8%, joining the Nasdaq in a correction. Both indexes are down more than 10% from record highs.
Friday’s slide is just the latest in a series of wild moves on Wall Street. The Dow soared 401 points on Thursday, after plunging more than 600 points the day before.
A variety of fears have sent stocks into a tailspin this month. The Nasdaq is on track for its worst month since November 2008.
“The sentiment in tech is remarkably poor,” said Nicholas Colas, co-founder of DataTrek Research. “Technology was priced for perfection. But we live in an imperfect and increasingly unpredictable world.”
Although Amazon reported record profit, the weaker-than-expected revenue and outlook underscores concerns that investors got too euphoric about highflying stocks.
Google owner Alphabet (GOOGL) tumbled 5% on weaker-than-expected revenue.
“They’ve been the momentum stocks. If they go down, they drag the market with them,” said JJ Kinahan, chief market strategist at TD Ameritrade.
And Snap (SNAP) plummeted 17% after failing to curb an exodus of users.
“Just plain brutal,” Paul Hickey, co-founder of Bespoke Investment Group, wrote to clients.
Not all tech results were disappointing though. Intel (INTC) recorded stellar chip sales and upgraded its outlook on Thursday. Shares of the chip giant rose about 2%.
Still, markets are starting to price in slower economic and profit growth as the bull market and business cycle age. The stimulus from tax cuts will eventually fade and the Federal Reserve’s interest rate hikes may also weigh on the economy.
In fact, the S&P 500 is now trading below where it was on December 22, 2017, the day President Donald Trump signed the tax cuts into law.
Investors are also worried about how the economy is holding up under pressure from slowing global growth and trade wars.
New numbers released on Friday show the US economy grew at a healthy 3.5% pace in the third quarter. The GDP growth, largely in line with expectations, represents a modest deceleration from the brisk 4.2% growth in the fourth quarter.
Colas said he’s confident the bull market isn’t over. Investors are merely anticipating a deceleration in profit and economic growth.
“I strongly believe this is a correction. Underlying economic fundamentals are still very good,” said Colas.
Global markets have also been in turmoil. European markets traded sharply lower, while Asian markets closed in the red.
