Mega-cap tech breaks down as rates stay hot — short Microsoft on continued weakness
Microsoft is having its worst month since the dot-com crash as mega-cap tech gets hammered. With a hawkish Federal Reserve determined to fight inflation and global currency markets in chaos, the expensive tech stocks that led the market higher are running out of buyers.
Idea
Microsoft's historic sell-off signals that mega-cap tech has lost its momentum. The catalyst is a 'shifting landscape' at the Fed where Chairman Warsh is expected to keep rates high, which hits growth stocks the hardest because their future earnings look less valuable. The yen hitting a four-decade low adds another layer of risk, as Japanese investors may pull money out of U.S. tech to bring it home. This toxic combination of rising rates, a crashing yen, and weakening mega-cap leadership makes the tech correction likely to continue.