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The Rio Tinto Limited (ASX: RIO) share price has dipped its toes into the red on Friday and is currently down 2.84% at $108.41.

It has now fallen almost 4% this week, and 10% over the past month.

While there’s been nothing price-sensitive out of the mining giant’s camp today, commodity and precious metals players have incurred losses across the board.

In wider market moves, the S&P/ASX 300 Metals & Mining Index (ASX: XMM) and the S&P/ASX 200 Materials Index (ASX: XMJ) are each down by 3%.

What’s up with the Rio Tinto share price today?

Australian-based commodity and resources ETFs performed well in 2022 and have realised heavy inflows both as a cause and effect of this trend.

However, these appear to have slowed in recent weeks, with the SDPR S&P/ASX 200 Resources Fund (ASX: OZR) clipping a $7.9 million outflow last month, and another $2.7 million this week, per Bloomberg data.

Hence, market dynamics have weighed in, spurred on by the outlook on Rio’s company fundamentals, according to analysts at JP Morgan.

“[Q1 FY22] iron ore shipments were an 8% miss vs JPM estimates on replacement mine commissioning issues and COVID disruptions,” the broker wrote in a recent note.

“2022 guidance of 320-335Mt is unchanged but given Q1 weakness we believe the market will now move towards the lower end.

“Overall, it was another soft quarter from RIO.”

JP Morgan is neutral on the stock, unlike many others, with 53% of analysts recommending to hold Rio at present, according to Bloomberg data.

The consensus price target on this coverage is $122 per share, suggesting a disconnect in analyst sentiment/outlook versus what the market is pricing for Rio Tinto.

In the last 12 months, the Rio Tinto share price has disappointed and is down 14% in that time. It has secured an 8% gain this year, while the SPDR Resources Fund is up 11%.

The post Why is the Rio Tinto share price stretching down a further 3% on Friday? appeared first on The Motley Fool Australia.

More reading

• ASX 200 mining shares slump, dragging index into the red
• After dropping 7% in a month, can the Rio Tinto share price stage a comeback in May?
• Here’s how some of the biggest ASX 200 shares are responding to the RBA’s rate rise
• What’s the outlook for ASX 200 mining shares in May?
• The Rio Tinto share price delivered a disappointing performance in April. Here’s why

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The BHP Group Ltd (ASX: BHP) share price is falling on Friday despite no word having been released by the company.

But at least it’s not alone. It’s joined in the red by most of its S&P/ASX 200 Index (ASX: XJO) peers.

At the time of writing, the BHP share price is $46.16, 2.51% lower than its previous close.

That’s despite the price of iron ore rising 1.4% to US$144.90 per tonne.

However, the ASX 200 is plunging 2.36%. Meanwhile, BHP’s home sector – the S&P/ASX 200 Materials Index (ASX: XMJ) ­– is underperforming.

Let’s take a look at what’s going on with the iron ore giant and its peers on Friday.

BHP share price slumps on Friday

The BHP share price is following the market into the red on Friday. Though, it’s outperforming many of its ASX 200 material producing peers.

Right now, the ASX 200 materials sector is recording a 2.85% drop.

The drop is led by lithium stocks, with the AVZ Minerals Ltd (ASX: AVZ) coming in as the sector’s worst performer. Its share price is currently down 7.7%.

Other major fallers include shares in Pilbara Minerals Ltd (ASX: PLS), Sims Ltd (ASX: SGM), and Liontown Resources Limited (ASX: LTR) – each having dropped around 6%.

The BHP share price is also outperforming that of fellow resources giant, Rio Tinto Limited (ASX: RIO). It’s currently down 3.07%.

The rough day on the market follows a similarly dire session in the US.

While most of Australia slept, the Nasdaq Composite, S&P 500, and Dow Jones Industrial Average each fell between 3% and 5%.

The US markets’ suffering followed the US Federal Reserve’s decision to raise interest rates by 0.5% in an attempt to reduce inflation.

The post The BHP share price is tumbling 3% on Friday. What’s going on? appeared first on The Motley Fool Australia.

More reading

• What’s the outlook for the BHP share price in May?
• Analysts name 2 inflation-beating ASX dividend shares to buy
• ASX 200 mining shares slump, dragging index into the red
• Here’s how some of the biggest ASX 200 shares are responding to the RBA’s rate rise
• The BHP share price has lost 10% in 2 weeks. Here’s why this expert is tipping a recovery

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The AVZ Minerals Ltd (ASX: AVZ) share price is tracing lower today and is currently down 7.5% at 78 cents.

While there have been no market-sensitive updates from the company today, ASX miners and metals producers are trading down in Friday’s session.

In wider market moves, the benchmark S&P/ASX 200 Index (ASX: XJO) is lower on Friday as well, currently down 2.3% at 7,193 points.

What’s up with the AVZ Minerals share price today?

Market data from Bloomberg reveals the commodity ‘factor’ that’s been driving returns in recent months has begun to slow.

That trend is matched in the level of outflows seen in investment vehicles that track various indices tied to commodities such as metals and energy.

“Precious metals and commodity ETFs are experiencing outflows,” portfolio manager Ingo Kurick wrote, citing The Daily Shot.

“Are investors realising peak inflation? Are [there] already fears of a recession coming? Or [are they] just taking profits after the rapid development?”

Extrapolating this data onto the Australian markets sees an uncanny resemblance, with indices tracking Australian materials, metals, and mining companies faltering this past month.

The S&P/ASX 300 Metals & Mining Index (ASX: XMM) has fallen 12% since 19 April, while the S&P/ASX 200 Materials Index (ASX: XMJ) has slipped by a similar amount.

Both are leading sectors this year to date, although have caved from 52-week highs since then and remain heavily compressed in May.

What else is weighing in?

The AVZ share price has suffered a similar fate since 19 April and is trading in line with the wider sector moves.

Earlier this week, AVZ provided an update on its operations in the Democratic Republic of Congo (DRC). The company revealed a mining licence has been awarded to its 75%-owned Dathcom Mining SA business for the flagship Manono Lithium and Tin Project. 

As reported by The Motley Fool Australia, comments in the release relating to Manono Project ownership claims might have had a negative effect on the AVZ share price.

Apparently, AVZ wants to acquire the remaining interest in Dathcom Mining SA. AVZ is in a joint venture with La Congolaise D’Exploitation Miniere SA.

Under the original terms of the JV, La Congolaise agreed to cede 10% of its interest to the DRC Government. However, La Congolaise has reportedly transferred its stake to Jin Chen Mining Company, with no apparent reasoning.

This could result in AVZ seeing its ownership in Dathcom reduced to 51%, whereas it had previously sought to sell its stake for US$240 million.

In the last 12 months, the AVZ share price has shot up by 427%. It is up just 2% this year to date after a 35% downfall over the past month of trade.

The post Why is the AVZ Minerals share price sliding 7% on Friday? appeared first on The Motley Fool Australia.

More reading

• These 3 ASX 200 shares are topping the share market’s volume charts on Thursday
• What will the lithium price be in 2025?
• Why ARB, AVZ, Temple & Webster, and Zip shares are sinking
• Here are the 3 most heavily traded ASX 200 shares on Wednesday
• Why the AVZ share price went from being up 19% to down 20% today

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Cochlear Limited (ASX: COH) share price has been caught up in the market selloff on Friday.

In afternoon trade, the hearing solutions company’s shares are down 5% to $217.85.

This means the Cochlear share price is now down 2% since the start of the year.

Is the Cochlear share price in the buy zone?

While the Cochlear share price weakness today is disappointing, one leading broker is likely to see it as a buying opportunity.

According to a note out of Morgans from this earlier week, the broker has retained its add rating and lifted its price target to $244.50.

Based on the current Cochlear share price, this implies potential upside of just over 12% for investors over the next 12 months.

What did the broker say?

Morgans has been looking over Cochlear’s plan to acquire Oticon Medical from Denmark-based healthcare company Demant for $170 million.

Oticon is a cochlear implants and bone conduction hearing solutions provider with 75,000 hearing implant recipients. And while it is a loss-maker at present, Cochlear intends to “determine and implement a plan that returns the business to profitability as quickly as possible.”

Morgans doesn’t appear concerned by its lack of profits and instead is focusing on the boost it could have to its market position in the bone-anchored hearing aid segment. It said:

“We view access to a 75k+ installed base, which COH has agreed to provide ongoing support, and fortifying its position in the bone-anchored hearing aid segment, as the driving force behind the deal, as sound processors/services can be developed to leverage this platform over time.”

Furthermore, the broker feels that Cochlear is getting a good deal and believes the company only has a low hurdle to overcome to generate an adequate return.

“The acquisition is earnings and return dilutive, at least in the near/medium term, but management reiterated its long-term 18% NPM [net profit margin] target, suggesting it believes it can succeed where Demant failed in turning around the business, and at 2.2x, the hurdle looks low to generate an adequate return, in our view.”

All in all, this appears supportive of the broker’s positive view on Cochlear’s earnings profile. Morgans concludes:

“While we continue to believe a full recovery from COVID-based disruptions still has time to play out, improving demand and strong pipeline, coupled with management’s increasing confidence, is all suggestive of an improving earnings profile.”

The post Broker says the Cochlear share price is in the buy zone following Oticon acquisition appeared first on The Motley Fool Australia.

More reading

• Top brokers name 3 ASX shares to buy today
• 2 medical tech ASX shares Morgans loves right now
• Cochlear share price falls on ‘loss making’ Oticon Medical acquisition
• 5 things to watch on the ASX 200 on Thursday
• The Cochlear dividend is being paid today. Here’s what you need to know

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Cochlear Ltd. The Motley Fool Australia has recommended Cochlear Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The final trading day of the week is proving to be a difficult one to stomach for Aussie investors. Heading into the afternoon the S&P/ASX 200 Index (ASX: XJO) is tracking 2.34% lower — a performance not seen since Russia invaded Ukraine earlier this year.

The dastardly downward move is unfolding as concerns around persistent inflation swell. While markets experienced a short-lived rejuvenation yesterday following official interest rate increases in Australia and the United States, investors are mindful of what’s to come.

Fuelling this unease, the Reserve Bank of Australia formalised its expectations for 6% inflation by December. For context, this estimate is up from its initial forecast of 3.25%. Consequently, the market is unsettled as it contemplates how far interest rate rises could go. At the same time, can central banks tame inflation without inducing a recession?

In light of this, days like this make it interesting to see which ASX 200 shares can hold up in the face of adversity.

These ASX 200 shares are making the most of a bad day

Today, there are seven ASX-listed companies that are avoiding the chaos playing out. Notably, the shares are sprinkled across a handful of different sectors including healthcare, materials, consumer staples, and consumer discretionary.

Firstly, the healthcare sector is putting up a valiant fight against today’s negative sentiment. The two ASX 200 healthcare shares in the green are Fisher & Paykel Healthcare Corporation Ltd (ASX: FPH) and Resmed Inc (ASX: RMD) — up 1.4% and 0.6% respectively. Both businesses are wildly profitable and have relatively low debt levels.

The next lot of shares to escape the clutches of inflation fears are two companies in the consumer staples sector. Coles Group Ltd (ASX: COL) and Metcash Ltd (ASX: MTS) are serving up modest gains, up 0.9% and 0.2% respectively.

Finally, the remaining green ASX 200 shares are spread across various sectors. These companies include Amcor Plc (ASX: AMC), Wesfarmers Ltd (ASX: WES), and Cimic Group Ltd (ASX: CIM). Gains across these individual shares range between 0.1% and 0.6%.

One thing is for sure, there are no ASX 200 tech companies making the green list today. The troubled sector is being beaten to a pulp, down 4% with big losses across names such as Xero Limited (ASX: XRO) and WiseTech Global Ltd (ASX: WTC).

The post Guess which ASX 200 shares are defying today’s selloff to climb higher appeared first on The Motley Fool Australia.

More reading

• Everything you need to know about the latest Macquarie dividend
• ASX 200 midday update: Macquarie and REA updates disappoint
• 5 things to watch on the ASX 200 on Friday
• Here are the top 10 ASX shares today
• 3 ASX 300 shares rocking new 52-week highs on Thursday

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended WiseTech Global and Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended ResMed. The Motley Fool Australia has positions in and has recommended Amcor Limited, COLESGROUP DEF SET, Wesfarmers Limited, WiseTech Global, and Xero. The Motley Fool Australia has recommended ResMed Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Those invested in AGL Energy Limited (ASX: AGL) shares can anticipate receiving the company’s demerger booklet later today after the Supreme Court of New South Wales gave the upcoming scheme meeting its tick of approval.

AGL’s directors are urging shareholders to vote in favour of the split at the meeting on 15 June.

At the time of writing, the AGL share price is $8.27, 1.84% lower than its previous close.

Its slump is in line with the broader market’s performance. Right now, the S&P/ASX 200 Index (ASX: XJO) is recording a 2.26% fall. Its struggle follows a dramatic tumble on US markets overnight.

Let’s take a look at the latest from the ASX 200 energy producer and retailer.

AGL share price suffers despite court approval

The AGL share price is struggling ahead of the release of a scheme booklet containing more details on the company’s planned demerger.

“[The booklet] is expected to be released later today, following registration … with the Australian Securities and Investments Commission (ASIC),” AGL told the ASX on Friday.

If successful, the demerger will see AGL Energy split in two.

It will result in the creation of energy producer Accel Energy and energy retailer AGL Australia. AGL Australia will inherit the company’s branding.

The court made its decision after reportedly dismissing a protest motion from shareholder Joshua Ross.

Ross was concerned the booklet wouldn’t accurately detail risks associated with the company’s coal-fired power production, reports The Australian.

The shareholder reportedly argued major energy user Tomago Aluminium could cut ties with Accel Energy following the expiry of its contract in 2028.

“[I]t’s not a matter for this scheme booklet to start entering into detail of the company’s confidential thinking about what it might be negotiating in six years’ time,” the publication quoted lawyers acting on behalf of AGL as saying.

Today’s news comes after tech billionaire Mike Cannon-Brookes upped the ante on his campaign to block the split this week.

AGL will hold a meeting where shareholders will have their chance to vote on the demerger on 15 June. The meeting will take place at Sydney’s International Convention Centre and online.  

The split needs the approval of 75% of shareholders.

Cannon-Brookes has committed to voting his 11.28% stake in the company against the transformation. He is urging his fellow shareholders to do the same.

The post AGL share price follows market lower despite demerger milestone appeared first on The Motley Fool Australia.

More reading

• Why are ASX 200 energy shares leaping higher today?
• Here’s why the AGL share price was cooking with gas in April
• Own AGL shares? Boss says Cannon-Brookes made ‘false claims’
• When, why, how? All the details on the AGL demerger and what might happen if it flops
• Own AGL shares? Boss slams Cannon-Brookes’ plan as ‘transition into a nosedive’

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Shares of Core Lithium Ltd (ASX: CXO) are trading lower today and now rest 6% in the red at $1.23 apiece.

Despite no sensitive news today, investors have sold off Core Lithium shares at a volume roughly 60% that of its 4-week average.

In wider market moves, both the S&P/ASX 300 Metals & Mining Index (ASX: XMM) and the S&P/ASX 200 Materials Index (ASX: XMJ) are down by nearly 3% today.

What’s up with the Core Lithium share price today?

The Core Lithium share price has gyrated this week amid a selection of sensitive updates released by the company.

That includes the signing of contracts for crushing services at its Finniss Lithium Project and obtaining environmental approval for its underground mine at the project.

ASX lithium players are also coming off a high base from yesterday’s trading session where several names came out on top after a week of mild volatility.

Unsurprisingly, the volatility has emerged amid a slowdown in the price of lithium, which had been racing to continuous new heights up until late March.

“Lithium carbonate prices in China fell to 462,500 yuan/tonne in early May, the lowest in two months on strong supply and lower demand,” Trading Economics showed.

Prices have since taken a small step back, levelling off back down to February 2022 levels.

Not only that, but reports show that investors may be shying away from the metals and mining sector(s), suggesting a potential flow-on effect to many names like Core Lithium.

US-based commodity ETFs saw net outflows of $556 million in April for instance, whilst global commodity and precious metals ETFs each realised similar trends.

Nevertheless, today’s loss extends Core Lithium’s decline to more than 16% over the last month of trading.

This year to date, the Core Lithium share price has held a 108% gain, bringing the upside for the past 12 months to more than 382%.

The post Why is the Core Lithium share price tracing 6% lower on Friday? appeared first on The Motley Fool Australia.

More reading

• Investing in ASX lithium shares? Here’s what you need to know
• Here are the top 10 ASX shares today
• 3 ASX 200 mining shares that surged more than 5% today
• Here’s why ASX lithium stocks are rocketing higher today
• Core Lithium share price is surging 7% on Thursday. What’s going on?

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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It has been an absolute bloodbath for the S&P/ASX 200 Index (ASX: XJO) and ASX 200 shares so far this Friday. As it currently stands, the ASX 200 has lost a nasty 2.3% and is well back under 7,200 points. But the Wesfarmers Ltd (ASX: WES) share price is faring far better.

As it currently stands, Wesfarmers shares are up by 0.16%. What’s more, the conglomerate broke even a few times today, rising as high as $49.86 a share. That’s well above the $49.46 it closed at yesterday.

So why is the Wesfarmers share price defying the market’s gloom so effectively today?

Why is the Wesfarmers share price defying the ASX 200 bloodbath?

Well, it’s not entirely clear. There’s been nothing out of the company itself of note today so far.

However, looking at the markets, we do see a pattern that would help illuminate things. The consumer discretionary sector that Wesfarmers operates in is currently the second-best performing sector of the ASX 200. Plus, other blue-chip shares outside the cyclical banking and mining sectors are also holding up pretty well.

Take Woolworths Group Ltd (ASX: WOW). Its shares are also escaping the worst of the market’s bad mood, and have only lost 0.3% so far today. It’s a similar story with Telstra Corporation Ltd (ASX: TLS), which has lost a similar amount. And the Coles Group Ltd (ASX: COL) share price is actually in the green today, up 0.65% so far at $18.60 a share.

So perhaps Wesfarmers’ relative strength today is a result of investors seeking ‘safety’ amongst ASX 200 blue-chip shares.

Whatever the reason, it probably feels pretty good to be a Wesfarmers shareholder right now. At the current Wesfarmers share price, this ASX 200 conglomerate has a market capitalisation of $56.11 billion, with a dividend yield of 3.43%.

The post Why is the Wesfarmers share price defying today’s ASX 200 bloodbath? appeared first on The Motley Fool Australia.

More reading

• Wesfarmers share price slips as Bunnings competition heats up
• 2 retail ASX shares Morgans rates as a buy now
• Is the Wesfarmers share price a buy or a sell in May?
• Here’s how some of the biggest ASX 200 shares are responding to the RBA’s rate rise
• Why did the Wesfarmers share price lag the ASX 200 in April?

Motley Fool contributor Sebastian Bowen has positions in Telstra Corporation Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended COLESGROUP DEF SET, Telstra Corporation Limited, and Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Macquarie Group Ltd (ASX: MQG) share price is having a day to forget.

In afternoon trade, the investment bank’s shares are down 8% to $186.42.

Why is the Macquarie share price tumbling lower?

Investors have been selling down the Macquarie share price today after the bank’s strong second-half growth wasn’t quite as strong as many in the market were expecting.

In case you missed it, this morning the company reported a 36% increase in full year operating income to $17,324 million and a 56% jump in net profit to $4,706 million. The latter comprises first-half profit of $2,043 million and second-half profit of $2,663 million.

While Macquarie revealed growth across all its businesses, the Macquarie Capital business was the standout with a 269% increase in its net profit contribution of $2,400 million. A net profit contribution represents management accounting profit before unallocated corporate costs, profit share and income tax.

This was supported by its Commodities and Global Markets (CGM) and Banking and Financial Services (BFS) businesses. Their net profit contributions increased 50% to $3,911 million and 30% to $1,001 million, respectively. Finally, the Macquarie Asset Management (MAM) business reported a 4% increase in its net profit contribution to $2,150 million.

Why wasn’t this good enough?

According to a note out of Goldman Sachs, Macquarie’s revenue and profit were both short of its expectations. It commented:

MQG’s FY22 NPAT was up +56% on pcp to A$4,706 mn and -2% below GSe but +4% above VA consensus. The miss to our estimates was revenue driven (-3.8% lower than GSe), driven primarily by a still strong trading result (+15% on pcp), but somewhat lower than we had forecast, a higher tax rate (2H22 26% vs. GSe 23%), partially offset outperformance on expenses (-6% lower than GSe).

One positive, though, is that it feels that Macquarie’s outlook commentary suggests that it is positioned to meet expectations in FY 2023.

As appears to now be normal practice, Macquarie has not provided any short-term outlook for the entire Group for FY22, noting a number of influences which might impact the outlook and highlighting that they are maintaining a conservative stance to capital, funding and liquidity. However, MQG has provided some high level guidance on the divisional performance.

While there are some “ups and downs”, particularly in CGM, there is nothing in the guidance that we expect will drive material divergence to our current FY23E NPAT forecast of A$4,133 mn (Visible Alpha consensus A$4,169 bn).

The post Macquarie share price tumbles 8% after FY22 results disappointment appeared first on The Motley Fool Australia.

More reading

• Everything you need to know about the latest Macquarie dividend
• ASX 200 midday update: Macquarie and REA updates disappoint
• Macquarie share price in focus amid FY22 profit surge
• 5 things to watch on the ASX 200 on Friday
• What is the outlook for the Macquarie share price in May?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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ASX 200 tech shares are having a rough day following a 5% plunge on the US Nasdaq Composite (NASDAQ: .IXIC) overnight. The NASDAQ fell by 647 points to 12,317 — its lowest level since November 2020.

US tech giants were sold off, with Amazon.com Inc (NASDAQ: AMZN) losing 7.56%, Zoom Video Communications Inc (NASDAQ: ZM) down 7.47%, Apple Inc (NASDAQ: AAPL) down 5.57%, Alphabet Inc (NASDAQ: GOOGL, GOOG) down 4.7%, and Microsoft Corporation (NASDAQ: MSFT) shedding 4.36%.

What happens in the US, happens in Oz

As usual, the ASX is following the US lead today. The S&P/ASX 200 Information Technology Index (ASX: XIJ) is down 4.37% at the time of writing. The S&P/ASX 200 Index (ASX: XJO) is also down 2.4%.

So, what’s the underlying cause for the fall in both US and ASX tech shares, and the markets in general today? Well, there’s a bunch of causes, actually. Investors are worried about rising interest rates, rising inflation, and a slowing US economy as the US Federal Reserve winds back quantitative easing.

Then there’s the Russia-Ukraine conflict which is pushing up commodity prices and the cost of energy, as well as the COVID-19 lockdowns in China. Lockdowns are a problem because they put economies on hold, and China remains our biggest two-way trading partner, so there can be an impact on demand for our goods and services.

Why are interest rates rising?

Central banks around the world are having to raise interest rates to deal with rapid inflation. The biggest issue with rising interest rates for share prices is that companies with big debt will end up paying more interest on their debt. That can equate to a big increase in costs, which will have a direct impact on earnings.

As a general rule, when investors get nervous, they sell off riskier assets — usually growth shares and primarily tech shares — before they sell anything else. This is because a lot of ASX tech shares are younger companies in expansion mode. Some are not yet making a profit, and they’ve taken on loads of cheap debt in recent years to grow their businesses. This strategy makes sense, but now that rates are rising, ASX tech companies need to adapt to increased costs.

It’s not like any of this is a surprise — ASX investors have known for some time that interest rate rises were imminent. In Australia, we had our first official cash rate increase this week when the Reserve Bank (RBA) increased the rate by 25 basis points from a historical emergency low of 0.1% to 0.35%. And Governor Lowe has plainly stated that there will be more to come. Over in the US, Fed Chair Jerome Powell has also told the market that it’s likely to be 50 basis point rises from here, and there will probably be a few.

What should ASX 200 tech shares investors do?

Even though the prospect of rate rises has been known for some time, the ASX is still reacting negatively. This begs the question, is the current turbulence creating an incredible opportunity to buy high-quality growth and tech shares at very attractive prices? That’s the trick with long-term investing – you need to be able to look beyond daily market panic and volatility and think years ahead.

Let’s look at some of the large-cap ASX 200 tech businesses whose share prices are being killed today.

• The Xero Limited (ASX: XRO) share price is down 7.69% to $87.88
• The Dicker Data Ltd (ASX: DDR) share price is down 6.31% to $12.33
• The WiseTech Global Limited (ASX: WTC) share price is down 6.08% to $41.61
• The NextDC Ltd (ASX: NXT) share price is down 5.26% to $10.44
• The Altium Limited (ASX: ALU) share price is down 4.36% to $30.73
• The TechnologyOne Ltd (ASX: TNE) share price is down 3.92% to $10.04
• The Computershare Limited (ASX: CPU) share price is down 3.29% to $24.11

Recap on ASX 200 tech shares

The S&P/ASX 200 Information Technology Index rose by 50.17% between the start of 2020 and the end of 2021. In 2022 so far, it has fallen 29.1%. By comparison, the ASX 200 rose by 10.56% between the start of 2020 and the end of 2021. In 2022 so far, it has fallen 5.35%.

The post Here’s why ASX 200 tech shares are having such a disastrous run on Friday appeared first on The Motley Fool Australia.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet (A shares), Alphabet (C shares), Altium, Amazon, Apple, Dicker Data Limited, Microsoft, WiseTech Global, Xero, and Zoom Video Communications. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has positions in and has recommended Dicker Data Limited, WiseTech Global, and Xero. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, and Zoom Video Communications. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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