UK tech stocks dumped as sharp sector sell-off on Wall Street continues following negative broker comment

Investors dumped UK tech stocks on Monday with the declines coming after a sharp sector sell-off on Wall Street on Friday precipitated by some negative broker comment which carried over into today.

Among the blue chips, software company Micro Focus PLC (LON:MCRO) and accounting software provider Sage Group  PLC (LON:SGE) were among the biggest fallers,  shedding 3.5% and 2.5% respectively as the pan-European tech sector notched up its worst day since the post-Brexit sell-off a year ago.

Neil Wilson, senior market analyst at ETX Capital said: “Just a blip, or a sign of more trouble for equity markets? Tech stocks are in full reserve again today after Friday’s sell-off left investors doubting whether the bull run has anywhere left to go.

“The big US tech stocks have gone stratospheric this year and investors are querying if there is anything left in the tank.”

Potential to rattle markets if it continues

He added: “At the moment it looks like it’s just a pause that allows for some profit taking before another push higher. But it certainly has the potential to rattle markets if it continues.”

In New York,  Apple Inc (NASDAQ:AAPL) had their worst day in more than a year on Friday, slumping by nearly 4%, and the iPhone maker’s shares were off another 2.5% in early New York trading today.

Wilson pointed out that Apple “got smacked by another broker downgrade (the second in two weeks) which has piled further pressure on the world’s biggest company.“

Goldman Sachs warning did the damage

He noted: “It’s all come off the back of a Goldman Sachs report warning that some of the big tech stocks were looking a touch overvalued. That spooked investors and saw anyone hanging on the momentum play taking profits.“

The analysts added: “A correction isn’t necessarily a bad thing and the sell-off so far hasn’t rattled the rest of the market despite the biggest technology companies accounting for about a third of all the gains on the S&P 500 this year.”

He concluded: “Are these stocks overvalued? It’s hard to judge when we’re talking about the tech titans, but on price to earnings metrics Amazon hasn’t looked this cheap for a long time.

“Apple is not as cheap as it was a year or so ago but it’s also been a lot more expensive. There is undoubtedly a chance that the current repricing represents some useful entry points for investors.”

Story by ProactiveInvestors