Once-soaring tech stocks sink in sobering comedown
SAN FRANCISCO -- The stock market's laws of gravity are ravaging its highest fliers.
Just look at the list of technology trailblazers whose values have plummeted from record highs during the past few weeks. Investors have re-focused on safer sectors such as utilities, health care and consumer staples instead of companies that promise potential growth from online services that are building huge audiences.
Stung by the abrupt change in sentiment, the stocks of recent stars such as Netflix, Facebook, Twitter and LinkedIn are 20 percent to 45 percent below their recent peaks. The steep downfall is raising questions about whether this is just a fleeting fit of fickleness or the foreshadowing of another market bubble about to burst.
The tech-driven Nasdaq composite index closed at nearly 4,358 early last month, its highest level since the 2000 peak, and has shed nearly 360 points, or 8 percent, since then.
Optimists expect a rebound. They point out that technology remains a bright spot in an otherwise dreary economy as software, computers, mobile devices and the Internet fill increasingly instrumental roles in work, entertainment and communications.
"Tech is where the action is," says longtime industry analyst Roger Kay.
Pessimists view the tech sector as Ground Zero for a long-overdue reckoning. They say the stock market that has been pumped up by the flood of money that the Federal Reserve has funneled into the long-term bond market since the financial meltdown of 2008 decimated the economy. Now, that those government-backed bond purchases are tapering off, people are starting to realize "the only thing holding this balloon up is the Fed blowing air in it," said Fred Hickey, editor of The High-Tech Strategist newsletter.
That's why he believes investors are parachuting from stocks that had soared to dizzying heights in a short period of time.
Internet video subscription service Netflix Inc., for instance, nearly quadrupled in value last year to top the charts of the bellwether Standard & Poor's 500 index. The company was worth $27 billion by the time its stock peaked at $458 early last month.
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