Why the Afterpay (ASX:APT) share price is tumbling today

The ASX 200 is pushing 1.5% higher on Thursday so why has the Afterpay Ltd (ASX: APT) share price tanked 5.7%?

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The Afterpay Ltd (ASX: APT) share price has struggled in the new year, falling almost 10% in just the last two ASX market sessions. 

Tech-heavy Nasdaq selling off 

The Nasdaq Composite (INDEXNASDAQ: .IXIC) has fallen 0.61% despite the S&P 500 Index (INDEXSP: .INX) and Dow Jones Industrial Average (INDEXDJX: .DJI) pushing a respective 0.57% and 1.44% higher. 

The broad weakness in the tech sector is likely a result of changes in the balance of power in US politics. With the Democrats taking control of the Senate raising the threat of increased regulation. 

For two years, a Republican-controlled Senate bottled up a vast majority of legislation coming out of the Democratic-controlled House of Representatives. The control of the Senate will now spell good news for incoming President Joe Biden's agenda on issues including healthcare, the environment, government reform and the economy. 

Experts see this victory as a potential broad rotation away from tech shares into more cyclical sectors such as banking, consumer staples and materials, similar to what the market experienced during November last year. 

S&P/ASX Information Technology (ASX: XIJ) follows suit

The S&P/ASX information Technology index has followed suit with sharp losses today, down 3.15% at the time of writing.

Some of the best performing ASX 200 tech shares from last year, including Xero Limited (ASX: XRO), Zip Co Ltd (ASX: Z1P) and Afterpay have struggled the most today. But taking a look at the bigger picture, the Afterpay share price ran more than 300% in 2020. 

The broader market is following the US, with the ASX 200 gaining 1.65%, at the time of writing, and more cyclical sectors such as financials, energy and materials running much higher. 

The Afterpay growth story in 2021 

Despite the Afterpay share price tanking this week, the company has a number of promising plans for the year ahead. This includes the pending approval for the acquisition of Pagantis in Europe and development of a strategy to tackle the South Asia market. 

Big brokers have also been bullish for the Afterpay share price, with Credit Suisse initiating a $124.00 price target in early December of last year. The broker anticipates a strong growth outlook to underpin strong financial performance and investor returns. 

Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Xero and ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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