📲 Why are tech stocks falling?

Do you remember?... the 21st of December (cue: Earth, Wind, and Fire jam). Back then: the stock market was hitting record highs left and right, and tech stocks were leading the charge. After peaking in mid-February, markets have fallen back to around December levels. Tech stocks got hit especially hard: the tech-heavy Nasdaq index is down 8% from its February 12th peak, and is up less than 2% for the year (after being up 11% at its high).

• Tech stocks are near “correction” territory: A drop of 10% or more from the most recent high. Corrections can hit assets (like stocks), indexes (like the Nasdaq), or entire markets. On Friday, the Nasdaq briefly hit a correction, when it was down 12% since Feb. 12.
• Big Tech influences the whole market, which is reflected in the S&P 500 index. On Feb. 12: Apple, Microsoft, Amazon, Tesla, and Facebook made up a whopping 21% of the S&P 500’s value.
• BTW: If the market falls 20% below its recent peak, it turns from a correction into a “bear market.” We saw that happen from February to March of last year, when Covid hit.

Why it's going down... Some investors think the tech sector is overvalued. Rising interest rates and inflation fears are also a huge part of it. Some worry that the Fed will raise interest rates to curb potential inflation, despite Jerome Powell saying (multiple times) that it’s unlikely to happen soon. To see why higher interest rates can be bad for stocks, check out our explainer.

• Combine these with the vaccine rollout and economic recovery, and you’ll see why stocks that were crushing it mid-pandemic are falling now.
• A few examples: Peloton, Zoom, Square, and Teladoc are all down over 20% since February’s peak.

Right in the bullseye... Target nailed it last year. Sales jumped a record 20%, up $15B+ from 2019 — that's more than Target's total sales growth over the last 11 years. Online order pickup and delivery soared, as you grabbed mini waffle makers curbside. Target's 1.9K US stores are key to its success: Tarjay uses stores as fulfillment hubs, and 95% of sales came from stores in 2020. Customers who shop both in-store and digitally spend ~4X more money than those who shop only in-store — and nearly 10X more than online-only shoppers. That's why Target plans to invest $4B into stores each year.

Forgot the cashew pesto... Instacart raised $265M in fresh funding, catapulting it to a $39B valuation — that's more than double its last valuation in October. It's the second time in a year that Instacart's valuation has doubled after bagging venture capital $$$. No shocker there: grocery and delivery have thrived during the pandemic — Instacart has both. In June of last year, Instacart claimed more than half of the online grocery delivery market. Now, it's reportedly considering going public through a direct listing.

Chip-pocalypse Now... The global chip shortage is continuing to hurt car makers, from GM to Ford. The latest to get hit: Tesla's Chinese rival Nio. Nio shares plunged 17% for the week, after it said that chip-pocalypse will hurt its electric car production next quarter. FYI: the average car contains 50 to 150 chips. Nio's production capacity will fall to 7.5K cars per month, down from 10K. But Nio's founder expects they can bump up production again in July.

Call me by your name... Oscar is the Millennial startup that's simplifying health insurance. ICYMI: American health insurance is (in)famously complex. Oscar wants to put a friendly face on it. Oscar's NYSE debut was less friendly: the stock has plunged 14% since Oscar went public on Wednesday. Investors weren't wowed by its 2020 earnings: sales fell 5% from 2019, and it lost $407M. But Oscar could benefit from the growth of the gig economy, since its core customers don't have insurance through employers (think: DoorDash drivers).

• Check: How the Senate's $1.9T stimulus bill differs from the House version.
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• Monday: International Women's Day. Earnings expected from H&R Block
• Tuesday: Earnings expected from Stitch Fix and Dick's Sporting Goods
• Wednesday: Earnings expected from Bumble, Campbell Soup, and Asana. Roblox goes public via direct listing.
• Thursday: One-year anniversary of the pandemic. Weekly jobless claims. Earnings expected from Oracle, DocuSign, Poshmark, GoodRx, and Ulta
• Friday: First anniversary of Broadway theaters closing in the pandemic.

Authors of this Snacks own shares of: GM, Apple, Amazon, Tesla, Square, and Microsoft

ID: 1553535