Cloudflare (NYSE: NET) stock has lost around 8% in the last two days as tech stocks feel the weight of strong selling on the Nasdaq. Following yesterday’s fed announcement, rising interest rates have been the most active catalyst in the tech sell-off; but there is oversight regarding changing sentiment regarding Omicron.
It was a story of two sides on Tuesday. The Dow Jones Industrial Average shined above all else, climbing to its second record of 2022; whilst tech stocks fell sharply. Investors attracted by the premise of rising long-term bond yields bought up stocks in economically sensitive areas such as finance, energy, and industrials; leaving tech stocks like Cloudflare flailing in the wake of a shunned market.
It’s difficult now to analyze the market without the darkened lens of Omicron weighing on traditional analysis. In this case, however, instead of fears guiding selling; it’s faith in a recovering industry that is attracting investment to areas that will benefit most in the recovery – rather than tech stocks whose performance isn’t affected by supply chain issues, staff shortages, or inflation.
Yet as we realize Omicron might not be as menacing as we once thought, industry is on the bounce; hence it isn’t surprising savvy investors are favoring the larger growth potential of the sectors most damaged – backed up by data that clearly shows expanding U.S factory activity and easing of supply-chain problems.
The chances are, Cloudflare will bounce back as companies turn to enhanced digital solutions to streamline data efficiency and online security. It’s times like these however where tech stocks might see temporary pullbacks as investors back recovering industry and rising bond yields.
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Oliver is a financial writer and analyst specialising in the US stock market, with years of personal experience in understanding micro/macroeconomic structures, market trends and fundamental analysis.