Two pros discuss why tech stocks were hit hard on Monday

The fears of rising inflation that may push the Federal Reserve into tightening the monetary policy is weighing on the major Wall Street indices this week. The benchmark S&P 500 index and the Dow Jones Industrial Average are currently more than 1.5% down compared to Friday’s close. The Nasdaq composite, on the other hand, is down over 2%.

Investors dumped big cap tech stocks on Monday. Apple and Facebook are now down 3.5% compared to the price at which they closed the regular session on Friday. Amazon is down 2%, Netflix is down 1.5%, and Tesla has slipped the most at 8%.

Daniel Flax joined CNBC’s “Squawk Box” on Tuesday

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Commenting on the sell-off in tech giants, senior research analyst Daniel Flax of Neuberger Berman said on CNBC’s “Squawk Box”:

“I think we’ll have concerns in the near-term around growth and rising interest rates. But what we look at are these longer-term secular trends around mobile, cloud, and digital infrastructure at large, and those trends in my view remain healthy.”

Flax expressed confidence that companies focusing on innovation and offering value to their customers will ultimately succeed in creating value for shareholders as well. He quoted Alphabet Inc., whose cloud platform is aiming at enterprise customers and Nvidia that has attractive growth prospects around the secular trend of artificial intelligence.

The Neuberger Berman analyst also saw Qualcomm as well-positioned in the world of IoT and 5G with solid long-term prospects. All in all, Flax said, “there’s a lot to like despite the near-term choppiness”.

Greg Branch’s comments on CNBC’s “Squawk Box”

Veritas Financial managing partner Greg Branch pointed out on CNBC’s “Squawk Box” that the market took a sigh of relief as the U.S. Bureau of Labor Statistics reported weaker jobs data for April on Friday. However, the latter interpretations of the employment report suggested that perhaps we aren’t demand constrained but are supply-constrained. Branch said:

“We have two things happening at once here. As you rightly indicated, inflation is one of them. As inflation rises, the market will have the largest impact on tech. But the other thing is that we are just starting to hit the period of toughest compares. Remember, we weren’t entirely forced to stay at home and work from home until the second quarter.”

“The market is questioning the strength of some of those trends and the persistence of those trends that those companies benefitted from. So, the market will wait and see if that strength is persistent as we start to emerge,” he added.

The managing partner also highlighted that Secretary Yellen signalled last week that they’re considering a change in posture. So, it’s worth looking at companies that stand to benefit from higher yields and higher interest rates.