What happened
Shares of Sea Limited (SE 2.03%), a digital entertainment and e-commerce company, were tumbling today likely for two reasons. First, some investors have grown increasingly pessimistic about high-growth stocks, especially in the tech sector, because of worries about the U.S. economy.
Additionally, some Sea investors are likely selling today ahead of the company's first-quarter financial results, which Sea will announce before the market opens tomorrow.
The tech stock was down by 4.4% as of 2:27 p.m. ET.
So what
Investors are nervous about the technology sector in particular right now as the U.S. economy is grappling with the highest inflation it's seen in nearly 40 years. The Federal Reserve has committed to slowing inflation down by implementing rate hikes to the federal funds rate this year which, in turn, could impede economic growth.
Image source: Getty Images.
Sea is based in Singapore, so it may seem odd that its shareholders would be worried about rising interest rates in the U.S., but since its stock is listed on the New York Stock Exchange, Sea's shares are being dragged down along with other tech stock peers.
The market is worried that aggressive moves by the Fed to bring down inflation could end up spurring a recession, which has led to most sectors experiencing significant sell-offs over the past several months.
Additionally, some Sea shareholders may be selling the stock today as the company prepares to release its first-quarter earnings report tomorrow.
Many times investors wait until after a quarterly financial report is released before selling shares of stock. But with some technology stocks currently under pressure from rising inflation -- and a generally gloomy perspective from many investors right now -- some Sea shareholders are looking for the exits as they anticipate worse-than-expected quarterly results.
Now what
There's no getting around the fact that it's a tough time to be growth stock investor right now. With inflation running high and the Fed focusing on raising interest rates this year, tech stocks could continue to slide in the near term.
But investors with a long-term perspective -- think years and not quarters -- have a better chance of beating the market if they don't panic. For Sea shareholders, that means keeping a close eye on the company's first-quarter financial results and then evaluating whether or not the company is moving in the right direction.
