Invesco QQQ, the exchange-traded fund that tracks the Nasdaq 100 index, slid by 2.1% to £387.50 in afternoon trading on Tuesday, extending its recent decline. The move came as US technology stocks came under pressure following the release of robust American jobs data, which suggested the labour market remains too tight for the Federal Reserve to begin cutting interest rates anytime soon.
The Nasdaq 100 itself fell by 2.3%, with heavyweights such as Apple, Microsoft and Nvidia all losing ground. The sell-off was broad-based, with the majority of the index's constituents in negative territory. Analysts pointed to a reassessment of the 'higher for longer' interest rate narrative, which has historically weighed on growth stocks that rely on cheap borrowing costs to fuel future earnings.
For UK investors, the decline in Invesco QQQ is particularly significant given its popularity as a low-cost way to gain exposure to US mega-cap tech. Many British pension funds and ISA portfolios hold the ETF, meaning today's drop will be felt by those with a tilt towards American equities. The fund has been a standout performer over the past decade, but rising bond yields and a stronger dollar have created headwinds in recent months.
“The market is now pricing in a higher probability of a rate hold, and that is hitting the most rate-sensitive parts of the market,” said a senior market strategist at a London-based wealth manager. “Technology stocks have benefited from low rates for years, and any shift in that outlook tends to trigger profit-taking.”
The FTSE 100 was also lower on the day, down 0.6%, as global risk appetite waned. However, the UK index fared better than its US counterparts thanks to its heavier weighting in defensive sectors such as energy and healthcare. Investors will now watch for the next US inflation report, due next week, for further clues on the Fed's policy path. Source: Reuters, Bloomberg