The ASX 200 tech sector looks set to be a bloodbath on Thursday after a selloff on the Nasdaq index overnight.
The illustrious tech-focused Nasdaq index had its worst session in almost a year after falling 3.3% overnight.
Why did the Nasdaq sink?
Investors were selling down tech shares following the release of minutes from the US Federal Reserve which suggested that tighter U.S. monetary policy was coming.
The Fed commented: "Almost all participants agreed that it would likely be appropriate to initiate balance sheet runoff at some point after the first increase in the target range for the federal funds rate."
This runoff has been classed as "the key risk for the year" by Jay Hatfield from Infrastructure Capital Management.
Hatfield told CNBC: "If the Fed starts shrinking the balance sheet that's going to be disastrous. I assume that they're going to keep the balance sheet flat, but it is possible if inflation stays really hot that they start letting the balance sheet run off. It's not just that they're not injecting liquidity, they're taking liquidity out."
"You don't want to be in the stock market when the Fed is taking liquidity out of it — it's like being in Coke when Warren Buffett is selling his position," Hatfield added.
ASX 200 tech shares to fall
Given how the Australian tech sector tends to follow the lead of the Nasdaq index, this doesn't bode well for ASX 200 tech shares this morning.
This is particularly the case for the Afterpay Ltd (ASX: APT) share price. It looks likely to fall to a new 52-week low on Thursday after the Block share price sank over 8% during overnight trade.
And with fellow BNPL provider Affirm falling 7%, this could mean an equally bad day for the Zip Co Ltd (ASX: Z1P) share price.
Elsewhere, Intuit shares fell 4%, which could be a bad sign for the Xero Limited (ASX: XRO) share price, and Autodesk, which attempted to acquire Altium Limited (ASX: ALU) last year, saw its shares fall 5%.
