Steep Stock Market Drop ahead of Federal Reserve Report

Federal Reserve Chairman Jerome Powell is going before Congress on Wednesday, and the stock market fell steeply Tuesday. Is there a connection?

The stock market fell by its highest margins in weeks on Tuesday, with the Dow Jones down 404 points, or 1.04%. The S&P 500 dropped 1.02%, with the Nasdaq Composite losing an impressive 1.65%.

The stock markets have not fallen this hard in three weeks, and many are blaming it on fears ahead of Fed Chairman Jerome Powell’s testimony in front of Congress, scheduled for later in the day on Wednesday. This testimony is important, as it marks the first day of semi-annual reporting to Congress. There are fears circulating about the new monetary policy that could be coming down the pipeline as a result of these meetings.

Is It Fed Fears or Tech Sock’s Fault?

Tech stocks dropped more steeply than just about any other set of stocks. After weeks of tech stocks doing remarkably well and propelling the markets to record highs, it looks like these stocks are no longer offering the support they used to.

Large-cap tech fell by 2.5%, which had a huge impact on the S&P 500, since tech stocks make up 30% of the trading on that index. The sizable drop in tech stocks took up the majority of the S&P 500 drop on Tuesday.

What we are seeing across the major indexes could be less Federal Reserve fears and more of a price correction for technology stocks. Several of those stocks have soared so high lately that it was only a matter of time before they started to fall to earth again.

Intel Corp dropped 5.37% on Tuesday, followed by Tyler Technologies’ drop of 4.78%. Semiconductor company Qorvo fell 5.76%, and Synopsys Inc, which develops automation software, dropped 4.89%. The S&P 50 cannot count on its tech stocks to keep it buoyant right now like it could over the last few weeks. We may continue to see some of these and other tech stocks correct for the near future.