5 things to know before the Nasdaq is hit by a $1.7 trillion wipe-out

A whopping $1.7 trillion wipe-out from the Nasdaq Composite Index is starting to look like it has more to run.

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The two-week rout followed Jerome Powell's appointment as chair of the Federal Reserve and his comments on quickening the rollback of the pandemic re-appointment. The hawkish signals are leaving investors bracing for rising interest rates that will hurt some of the most highly valued stocks, such as Zoom Video Communications Inc., Adobe Inc. and Tesla Inc. Borrowing costs are likely to go up even as the new omicron variant of the coronavirus raises the risk of an economic slowdown.

A new Covid variant started the ruckus for markets but we view it as secondary to the real culprit, according to Morgan Stanley equity strategist Michael J. Wilson, who wrote in a report Monday, referring to the Fed.

The jolt will be felt more by the Nasdaq Composite, home to some of the world's most expensive stocks. They include the electric-vehicle maker Rivian Automotive Inc., which hasn't recorded any meaningful revenue, but has a $93 billion market value, or software companies Datadog Inc. and Zscaler Inc. trading at more than 50 times sales. The average S&P 500 stock trades at 3 times sales.

Phil Blancato, chief executive officer of Ladenburg Thalmann Asset Management, said on Friday that some of these future tech stocks could go down another 5% to 8%. It seems to be something that isn't going to happen if you listen to the Fed speak. One of the biggest beneficiaries of the bull market in fast-growing companies, Cathie Wood, is suffering. Her flagship ARK InnovationETF has lost 40% of its value from its February peak, sinking 13% last week alone. Many of the stocks in the fund are expensive and barely unprofitable.

Mike Mullaney, director of global market research at Boston Partners, said there was a flight to quality. In tech and communications services, there are a lot of high-flying stocks with huge price-to- sales multiples and not much in earnings, and that is what is getting thrown out of the bath water right now. Mullaney said Friday that he sees old-school tech companies such as Seagate Technology Holdings Inc., HP Inc. and NXP Semiconductors NV -- all profitable and selling for about the market s multiple or less doing well.

The biggest tech companies are feeling the pain. Apple and Microsoft Corp., the world's top largest, lost $200 billion in value on Friday alone. It could get worse. The tech-heavy Nasdaq 100 fell by 0.5% on Monday morning, underperforming the benchmark S&P 500 Index.

The Nasdaq Composite is down 6.2% from its Nov. 19 peak, while the S&P 500 is down 3.5% in the same period.

Some investors say it's time to buy on market declines, given the long-term prospects for some technology companies.

Kim Forrest, Chief Investment Officer at Bokeh Capital Partners, pointed out that companies like Xilinx Inc. Micron Technology Inc. and Intel Corp. are a dip buyer because of the worldwide rollout of 5 G phone networks, and that's why she believes that they are a dip buyer.

None The Hang Seng Tech Index Hang Seng Tech Index fell 3.3% in Hong Kong to a all-time low as concerns mounted over how much more pain Beijing is willing to inflict on the sector.

After the Securities and Exchange Commission ordered a subpoena from the Securities and Exchange Commission, none of the shares of Lucid Group fell.

Key companies in its portfolio delivered more bad news, and none SoftBank extended a six day slump with a drop of 8.2% in Tokyo.

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According to Citigroup Inc., none of Didi's delisting plan is an isolated case and there is nothing new from the U.S. regulators that may cause more Chinese companies to leave soon.

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