Large-cap technology stocks fell Thursday, dragging Nasdaq futures lower.
Dow futures declined by nearly 100 points as worries about the effects of rate hikes and the removal of stimulus by the Federal Reserve hit the broader market.
Shares of Facebook, Amazon, Apple, Neftlix, Google-parent Alphabet and Tesla also were lower before the opening bell. Nasdaq futures pointed to a sharply lower open for the tech-heavy index, falling nearly 60 points.
Analysts at Canaccord Genuity downgraded Alphabet’s stock to hold from buy, noting they believe the ad load increases on mobile search and YouTube from the past two years will “be hard to repeat.”
Technology has been on a tear this year, with the S&P tech sector rising about 18 percent to easily outperform other industries. This year’s best-performing sector has been under pressure recently amid growing valuation concerns. Earlier this week, the sector completed its largest two-day decline since December.
In a note to clients Thursday, Jefferies strategist Sean Darby compared the technology stock run we’re seeing now to the “melt-up” that occurred in the late-1990s. Darby noted that both periods had declining inflation and low rates, alongside a thriving digital economy. But ultimately that didn’t end well.
“After Y2K occurred, the Fed lifted rates which eventually evaporated the cheap financing that had underwritten the technology boom,” Darby said.
The Fed raised interest rates Wednesday for the second time in 2017 and the fourth time since December 2015. It also said it plans to start unwinding its monster $4.5 trillion balance sheet this year.