Why tech stocks are struggling so much right now The tech-heavy Nasdaq Composite was a huge beneficiary of the stock market's epic recovery from the pandemic. Now, it's facing ever deeper losses as investors fear that fast-growing companies are running out of steam. What's happening: The Nasdaq dropped almost 4% on Tuesday, sending the index to its lowest level since December 2020. The S&P 500 lost 2.8%. It's now 13% below its January high. "The market has fallen significantly from its peak at the start of the year and, more recently, has taken a sharper drop," said Brad McMillan, chief investment officer at Commonwealth Financial Network. chart So what's driving the painful sell-off? Earnings: Stocks of Big Tech companies soared after the 2020 market crash. Their businesses proved resilient, and investors — flush with cash thanks to efforts by central banks to prop up the economy — rushed to capitalize on their rapid growth. Now, Wall Street is giving these companies another look amid doubts they can maintain the momentum needed to justify their high valuations. Last week, Netflix's earnings catastrophe sent its shares plummeting. Google's parent Alphabet said Tuesday that its sales growth in the first quarter slowed to 23%, slightly below Wall Street's forecasts. Alphabet's full-year sales for 2021 came in at 41%. Shares fell more than 3% before the report on Tuesday and are down another 4% in premarket trading on Wednesday. "They don't tend to miss their earnings, so I think that was the big shock for markets," Justin Onuekwusi, Legal & General Investment Management's head of retail investments, told me. Economy fears: The Federal Reserve is yanking support for the economy to fight the highest inflation in four decades. But if it's too aggressive in raising rates, it risks sending the US economy into a recession, which would further weigh on corporate earnings. Deutsche Bank, which earlier this month became the first major bank to forecast a US recession next year, said Tuesday that it now expects a "major" downturn. In a report titled "Why the coming recession will be worse than expected," its economists said it's "highly likely that the Fed will have to step on the brakes even more firmly, and a deep recession will be needed to bring inflation to heel." Growth is also slowing sharply in China, the world's second largest economy, as the country tries to limit the spread of coronavirus. That's bad news for the rest of the world. "Clearly, as we're recovering, we need Chinese demand," Onuekwusi said. Rising rates: Yields on US bonds, which move opposite prices, have jumped this year in anticipation of the Fed's plan to raise interest rates. The yield on the benchmark 10-year US Treasury note is now at 2.76%. At the beginning of 2022, it was near 1.5%. As yields on safe debt rise, investors start to rethink riskier gambles on the future earnings of companies. Tech stocks, in particular, start to look less appealing. Looking ahead: Not all earnings have been cause for concern. Microsoft, which also reported results on Tuesday, said its revenue rose 18%. Its shares are up 4% in premarket trading. But with Facebook's Meta, Apple and Amazon still to come this week, markets are likely to remain on edge. "Because these stocks are bigger and bigger and bigger, any disappointment is going to have a massive impact," Onuekwusi said.