The tech-heavy Nasdaq Composite took another beating on Friday as a mixed U.S. jobs report collided with a broad selloff in software and chip stocks. What this really means is that investors are struggling to make sense of the conflicting signals around the economy and the Federal Reserve's next move.
The Nasdaq dropped over 1%, dragged down by major names like Apple, Alphabet, and Amazon. The S&P 500 also notched its second straight day of losses, falling 0.6%, while the Dow Jones Industrial Average managed to eke out a small gain.
Jobs Report Muddies the Waters
The broader market selloff was triggered by the January jobs report, which showed the U.S. economy added 151,000 jobs - well below the 190,000 that economists had forecast. However, the unemployment rate ticked down to 4.9%, the lowest level in nearly 15 years, and wages grew at the fastest pace in months.
The mixed data left investors unsure of how the Federal Reserve will proceed with interest rates. Fed Chair Janet Yellen has signaled that the central bank will continue raising rates gradually this year, but the jobs report has clouded that outlook.
Tech Rout Deepens
Adding to the market's woes was a deepening selloff in technology stocks. The Nasdaq's losses were led by big declines in semiconductor makers like Nvidia and Intel, as well as software giants such as Microsoft and Amazon.
The bigger picture here is that the tech sector, which had been a reliable driver of market gains in recent years, is now facing a reckoning. Investors are souring on the industry as the Fed's rate hikes make high-growth, high-valuation tech stocks less attractive.
And as The Wall Street Journal reports, the tech selloff could deepen if the Fed remains hawkish in the face of a slowing economy.