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Powell laid the groundwork for Tech’s possible wreck with QE Punt

Big tech’s market-leading days can be counted on thanks to Federal Reserve Chairman Jerome Powell.

The Nasdaq 100 fell as much as 2.8% on Thursday, dragged down by a decline in megacaps technology stocks that have driven this year’s rebound. The picture came after Fed decision-makers promised to keep interest rates low until inflation exceeds 2% on average, while not giving any new details about the central bank’s bond buying plans.

The lack of commitment to quantitative easing sent a shudder through technical stocks, which have benefited greatly from bottom interest rates in addition to the pandemic̵

7;s home trading. Borrowing costs almost zero have helped justify the industry’s high valuations, with the Nasdaq 100’s price revenue exceeding 40 before the last sale – the highest since 2004. It has pushed the Nasdaq 100 up by about 58% compared to its lowest in March, but the prospect of strong sales under long-dated government bonds is cooling rally.

“Yesterday’s meeting, however, did not fully support the risks, as guidance on QE was weak,” Dennis DeBusschere, an strategist at Evercore ISI, wrote in a statement Thursday. “Investors expected a policy package that strongly anchored the entire yield curve, but got one designed to strengthen the curve.”

The Nasdaq 100 price revenue ratio exceeded 40 before the sale

The sale extended the Nasdaq 100’s September losses, with the meter on its way to its first monthly decline since March. The yield on 10-year government bonds was about a basis lower, when traders entered buy dip after Wednesday’s bond route.

The Fed’s oft-repeated commitment to keeping monetary policy loose amid historically low government interest rates has helped tech bulls remove dot-com comparisons. At the height of the bubble in 2000, reference rates were close to 6.8%. They are currently around 0.68%.

“Although the current rally in technology stocks is often compared to the dot-com era, there is a striking difference,” wrote Jim Paulsen, chief investment strategist at Leuthold Group, in a statement Thursday. “Today, the continued overperformance of technology stocks is chronically strengthened by returns.”

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