Tech stocks are hurtling toward a correction –

Persistently high inflation has dealt investors a wake-up call this year, sending them scrambling to re-engineer their portfolios in anticipation of more aggressive action from the Federal Reserve.

The tech-heavy Nasdaq Composite is down almost 10% from the all-time high it notched in mid-November. That means the index is flirting with a correction. “You’ve had a big clear-out,” IG chief market analyst Chris Beauchamp told me. The entire tech sector has been hit hard as Wall Street reacts to the highest consumer prices in the United States in almost four decades.

Government bond yields, which move opposite prices, have been rising sharply in anticipation of a stronger intervention by the Fed, which is about to start raising interest rates after a long period of easy money. That makes riskier assets with rich valuations look less attractive. The ARK Innovation exchange-traded fund, whose top holdings include Tesla (TSLA), Roku (ROKU), Teladoc Health (TDOC), Zoom Video (ZM) and Coinbase, has lost more than 30% since the Nasdaq peaked.

Bigger tech companies with more cash on hand are much less sensitive to interest rate hikes. But they haven’t been spared as investors reduce their holdings in the entire sector. Apple (AAPL) and Amazon (AMZN) are more than 4% lower so far this year, while Facebook owner Meta (FB) is down 5% and Google parent Alphabet (GOOGL) is off 6%. Is this a turning point as the pandemic economy enters a new era? Since 2020, tech companies have powered huge market gains, increasing their clout and generating substantial returns for shareholders.