The local sharemarket extended the tech sell-off on Thursday with investors spooked by December minutes from the US Federal Reserve signalling an earlier than anticipated rise to interest rates.
The S&P/ASX 200 dropped sharply at the beginning of trade and slipped further down as the day wore on, eventually closing down 2.74 per cent, or 207.5 points, to 7358.3 points.
Every sector was in the red, dragged down predominantly by information technology stocks, as well as the real estate, healthcare and consumer sectors. Buy now, pay later giant Afterpay’s stock price was battered by more than a tenth of its value, dropping by 10.76 per cent to $71.85.
Wilson Asset Management senior investment analyst Shaun Weick said, much like Wall Street overnight, the local bourse’s performance had been heavily impacted by the release of the US Federal Reserve’s December minutes signalling it was ready to aggressively wind back policy and hike interest rates earlier than expected.
“It may become warranted to increase the federal funds rate sooner or at a faster pace than participants had earlier anticipated,” the Fed minutes stated.
Wall Street was rattled overnight, with the S&P 500 dropping 1.9 per cent, the Dow Jones dipping by 1.1 per cent and the tech-heavy Nasdaq nosediving by 3.3 per cent.
“It’s caught investors slightly off-guard,” Mr Weick said. “It did surprise investors, the pace at which they’re willing to withdraw stimulus and raise interest rates. The market’s really reacting to that because the implication there is that bond yields are moving higher in a shorter time frame.”
The day’s worst performer was Pinnacle Investment Management, which saw its share price plummet by 13.14 per cent to $13.68.
Even the best performer of the day, uranium producer Paladin Energy, saw its share price tick up by just 1.63 per cent. The next-best performing stock mining giant Rio Tinto, which rose by 0.73 per cent.
Mr Weick said investors were de-risking and moving towards more defensive stocks, including the industrials and resources sectors. “I think investors will start dipping their toes back into the small and mid-cap part of the market, which has underperformed for the last few months,” he said.
“We’re going to be more about earnings growth as opposed to … multiple expansion, given that rates are rising.”
Source: Thanks smh.com