Tech selloff drags world stocks down

MSCI’s gauge ​of stocks across the globe slid 1.66%

World stocks dropped on Tuesday, dragged lower by a broad selloff in technology and ​semiconductor shares as investors continued taking profits on a long rally while bracing for more aggressive U.S. central bank action to fight inflation.

On U.S. stock market, ‌the tech-heavy Nasdaq led losses, weighed down by semiconductor shares and some megacap stocks.

Nvidia declined 4% and Tesla shed almost 6%. SpaceX shares reversed an early decline to trade up around 1%. Chip stocks ended down almost 8%.

The Dow Jones Industrial Average shed 0.09%, the S&P 500 shed 1.4%, and the Nasdaq Composite slipped 2.2%.

If you look at the technical indicators, the SOX was at its ​most overbought level in the last three years so there’s definitely an element of expectations getting stretched, market positioning getting stretched, and valuations getting stretched, ​said Amanda Agati, chief investment officer at PNC Asset Management Group.

European shares also dropped, with the STOXX 600 down 0.73%, pressured by ⁠losses in semiconductor and chip-equipment makers. The weakness followed declines across Asia, where Seoul’s Kospi index slumped 10% in its sharpest one-day drop since March. MSCI’s gauge ​of stocks across the globe slid 1.66%.

This looks like a largely technical move, driven in part by profit-taking ahead of Micron’s earnings, said Ross Mayfield, investment strategy analyst at ​Baird. The trade has been highly concentrated and flow-driven, which makes it vulnerable to relatively small shifts in sentiment. In that sense, it doesn’t appear to be closely tied to the fundamentals of the AI story, but rather to the heavy concentration and strong inflows into tech and global tech over the past few months now starting to unwind.