The stock market's first day of trading for 2016 did not go so well for several local tech companies, with Alphabet, Facebook and Netflix all taking big hits in a trend that left analysts feeling pessimistic about the future.
Wired reports that "a worldwide stock sell-off sparked by a weaker-than-expected manufacturing report in China" caused markets in Asia, Europe, and the US to close far lower than expected, with Alphabet and Facebook down 2 percent, and Netflix down 4 percent.
Those might not seem like big enough percentages to get worried about on the surface, but Wired warns that "any softening in tech shares could mean bigger problems for the market as a whole."
"The question is how buoyant the tech sector can remain if the global economy as a whole drags," they ask, the same question raised by Ken Rosen, UC Berkeley's Chair of the Fisher Center for Real Estate and Urban Economics, in November.
In fact, it was Rosen who rang the alarm regarding the culprit behind yesterday's troubles, China. At a November event in San Francisco, Rosen cautioned that if the Chinese economy collapses the way some analysts believe it might, we could see "a global downturn that leaves no region safe, including the United States," and spurs "investors to dump risky assets around the globe."
The result, the SF Business Times said at the time, would be "pullback in investors' risk appetite, and thus their willingness to write big checks to Uber and other profitless startups at lofty valuations," all of which would "spell trouble for the regional economy."
So was yesterday the beginning of the end? Michael O’Rourke, chief market strategist at Jones Trading, tells Wired that "Throughout the past few years, if you think about how each year started compared to this one, the prospects for this year are less optimistic than most.”
And with that lack of optimism comes closing checkbooks, New York University business school professor Roy Smith tells Wired, saying that "investors may be worried that overvalued tech startups could subject markets to more less-than-stellar IPOs."
But anyone would be foolish to start freaking out based on one single day, right? Even if that day, as Reuters reports, had "the Dow marking its worst start to a year since 2008"? Oh, and "both the S&P 500 and the Nasdaq had their worst starts to a year since 2001"?
John Lonski, the chief capitals markets economist at Moody’s Analytics, isn't saying you should freak out, but he's not saying you shouldn't, either.
“Look at overseas markets—not only China—but we are looking at deep declines in Europe, Japan, and other emerging markets," he says.
“We’re starting the year with a reminder to the financial markets that there’s a great deal to worry about.”
