Social Media, Tech Stocks Fall in Response to China Market Correction
August 25, 2015 Aaron Miles
It remains to be seen if the current crisis in Chinese markets is just a painful correction or a sign of a larger problem, but it has hit American markets hard. Tech and Social Media stocks have taken a beating, with many losing over 10 percent of their value, although early trading on Tuesday suggests the United States may be able to weather the storm better than markets in Asia.
According to Romain Dillet at TechCrunch, Facebook was down as much as 12.1 percent, with Apple off 10 percent, Amazon 6.4 percent, and Microsoft 5.8 percent. Dillet notes that this is a widespread, if temporary, downturn, with stocks of companies that were in very good health still taking big hits. Netflix lost 14.7 percent, despite it's great success over the last few months. PayPal, which recently broke away from eBay and got a jump of 8.3 percent from the move increasing its valuation to around $50 billion, still lost 9 percent of its value due to the market volatility.
Despite the seeming doom that comes with any kind of market crisis, this is not as bad as it seems, mostly because the most severe hits listed above occurred at the very beginning of the trading day. Most stocks recovered somewhat over the course of the day (Apple was only down 3.2 percent by closing). All of this suggests a temporary shock as opposed to a longer downward trend, but it is important to remember that while this may seem like numbers on a screen, but this is hundreds of billions of dollars of market value gone.
Dillet states that tech stocks may be taking a bigger hit than other types of stock because many tech companies, especially Apple, are developing markets and products in China. A poorer China means fewer people in the world's largest market can afford their products and services, which may make people wary of further investment. Such a possibility lead Apple CEO Tim Cook to send the following to CNBC's Jim Cramer:
Although the Chinese market continued to fall overnight, markets in the United States are showing some resiliency, as investors looking for deals pour money into the markets. As of this writing, via the New York Times's stock ticker, the S&P is up 2.0 percent, Nasdaq is up close to 3 percent, and the Dow is up nearly 2 percent, with stock prices in Europe rising as well.
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