| Jeran here. I'm an equities reporter at Bloomberg, and if you're a regular reader, you'll note that I'm only called upon to write this newsletter when something goes awry in the stock market. Right now, we're in the midst of the worst technology selloff in half a year. After peaking in February, the Nasdaq 100 fell 11% through early March. While the tech-heavy gauge has recovered some lost ground in the past two weeks, it's still well off its highs. The dip has echoes of the last tech rout in September, when the Nasdaq fell 11% in just three days. In both cases, concerns over sky-high valuations were at the heart of the market swoons. Each selloff occurred with the Nasdaq's price-to-earnings ratio above 40—a level that's higher than at any other point in more than a decade. Those high prices are even harder to justify now, with interest rates rising and inflation expected to tick up later this year. But there's another element of angst in the tech sector these days, and it mounts with each administered vaccine and re-opened business: the specter of a return to the real, non-digital world. Investors can now see faint outlines of the end of the Covid-19 pandemic, which, as horrific as it's been, has turbocharged growth for many technology companies and delivered windfalls to shareholders. Suddenly, the future is looking less bright in certain patches of the market and investors have become more wary of premium stock prices. Many of last year's hottest trades have broken down. Snowflake Inc., the rapidly growing cloud-computing company, has fallen 44% from a record high in December. Zoom Video Communications Inc. is down 45% from its peak. And a basket of some of the most expensive tech stocks tracked by Goldman Sachs is down 24% from a high earlier this year. Investor jitters have even hit Chinese technology stocks. Some of the country's highest fliers, like iQiyi Inc. and Tencent Music Entertainment, tumbled more than 30% in the last two days. The selloff was worsened by government efforts to step up regulation and the threat of delistings in the U.S., but big run-ups and lofty valuations were a common theme. Despite the recent selling, though, some of the most expensive stocks are still looking pricey, according to Sanford C. Bernstein & Co. There are more technology stocks now trading above 15 times revenue than anytime since the tech bubble, Bernstein analyst Toni Sacconaghi wrote in a note to clients this week. Meanwhile, the five-year earnings-per-share expectations for these stocks have declined since the end of the year. The combination "makes us worried," he said. Of course, investors who have bought technology stocks after they've fallen have made a killing over the years and there are plenty of market professionals advocating for that mindset now. As my colleague Elena Popina wrote, UBS Group AG raised its recommendation to overweight this week—three months after the bank turned cautious on technology stocks. The sector's fundamentals remain strong, and the selloff has taken some froth out of valuations, equity strategist Keith Parker said in a note to clients. Another optimistic sign: April has long been the best performing month on average for the S&P 500, notes Susquehanna strategist Christopher Murphy. "While the transition period this month has been painful," Murphy wrote in an email, "the end result will likely be a much better risk-reward for equities" next month. —Jeran Wittensein | 
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