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The fall by the Nasdaq was its worst since November 2011. The Nasdaq Biotech index and the iShares Nasdaq Biotechnology EFT dropped 5.6%The Standard & Poor's 500 closed 2.1% lower, falling below its 50-day moving average and ''dangerously close'' to crossing the 100-day moving average, Craigs Investment Partners broker Chris Timms said.
''Selling was so indiscriminate that only about 2% of 500 members of the index closed higher.''
The fall on the Nasdaq flowed through to the New Zealand market. Xero traded down as low as $30 a share after reaching a high last month of $46.
Dunedin-based Pacific Edge, another top 50 company, reached a daily low of $1.04 before moving up to $1.17, having hit $1.76 on February 3.
Mr Timms said the technology and biotechnology sectors had been trading well for some time.
''People have been patting themselves on the back about getting Xero right. But it has been a bit of a yo-yo session this week; down on Wednesday, up on Thursday and down on Friday. A case in point.''
Pacific Edge was also getting knocked around and others affected included SLI Systems, Wynyard and GeoOP, the online job management and software provider.
Diligent had been affected also, but it had other fundamental issues it was dealing with, he said.
''These stocks have had a massive run and investors are asking themselves: `Is it coming to an end?'.
''I don't think there is anything wrong with Pacific Edge as a company, it is just caught up in the general sentiment towards the sector. People have been looking sideways at the people selling down their shares, and taking something off the table, but I don't believe there is anything untoward in that.''
One of the problems for Pacific Edge was the lack of ''substantial news'' from the company which had previously driven the share price rise, he said.
The last news had been about a research grant earlier this year. However, it had been the United States deals in November which drove the rise in share price.
There had been ''tech bubbles'' in the past and speculators looked for purely growth stocks, Mr Timms said. Xero had grabbed a lot of attention, particularly because of chief executive Rod Drury, and there had been some over-exuberance from buyers.
Some of the investors would be selling out, waiting to see what the company's plans were, before deciding whether to buy back in, Mr Timms said.
''They are not long-term investors. Some of the people who have bought into Auckland Airport and Fisher and Paykel are long-term investors looking for income. The movements are more muted, without the volatility usually sought by technology investors.