Why Are Tech Stocks Falling Today?

Shares of several of the world’s largest technology companies—including Amazon (NASDAQ:AMZN) , Alphabet (NASDAQ:GOOGL) , Apple (NASDAQ:AAPL) , and Facebook (NASDAQ:FB) —were in the red on Wednesday morning, just one trading day after the stock market surged to new all-time highs.

This week has been an interesting one for domestic and international politics, with the GOP’s tax bill and the Fed chair confirmation process dominating investor attention at home and renewed tensions with North Korea causing concerns abroad.

On Tuesday, the Pentagon confirmed that North Korea launched an intercontinental ballistic missile over the Sea of Japan. This was Pyongyang’s first missile test in two months, and according to Secretary of Defense Jim Mattis, the weapon went “higher, frankly, than any previous shot they have taken.”

Nevertheless, investors shrugged off the news yesterday, opting instead to reward stocks for the progress made on the Republican tax reform bill and the positive reaction to Fed Chair nominee Jerome Powell’s testimony.

The GOP’s highly-anticipated tax package, which includes significant reductions for large corporations like the aforementioned tech behemoths, was approved by the budget committee and could see a final vote on the Senate floor this week. Meanwhile, Powell is expected to witness a smooth path to confirmation.

Tuesday’s news out of Washington was enough for stocks to surge to new all-time highs, but investors entered Wednesday with a bit more caution.

Shares of Amazon dipped as much as 3.6% in morning trading Wednesday, while Alphabet dropped as low as 2.7%. Apple shares bottomed out about 2.4% below Tuesday’s close, and Facebook fell as much as 4.6%.

Elsewhere in the tech world, PayPal (NASDAQ:PYPL) , which had surged nearly 30% over the past three months, dropped over 6.7% in morning hours. Video streaming giant Netflix (NASDAQ:NFLX) fell nearly 5.1%, and red-hot payments company Square (NYSE:SQ) was briefly down as much as 9.4%.

Wall Street darling Nvidia (NASDAQ:NVDA) also dropped, with shares reaching an intraday low that was nearly 7% off of Tuesday’s close. The tech-heavy Nasdaq Composite Index was down over 1% from its new highs.

North Korea is certainly not entirely to blame for today’s tech selloff. As we approach the end of the month, large funds are beginning their rebalancing process, and it is not surprising to see a slight shift away from tech stocks after the sector’s recent run-up.

Tech has dominated Wall Street for the majority of 2017, but after a relatively strong Q3 earnings season for our industry behemoths, it makes sense that investors would start taking profits now. And let us not forget, tech is still considered a volatile sector by many, so geopolitical tensions could underscore a desire to move to more tried-and-true areas.

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