Big Tech's Big Weight

By Nicholas Jasinski |  Thursday, April 30

Not the Cruelest Month. A dose of dire economic data from both sides of the Atlantic knocked stock indexes lower today. Jobless claims, retail spending, and gross domestic product figures all illustrated the depths of the coronavirus shutdown's impact on economies across the globe. 

But you wouldn't know it from the past month of stock market action. The S&P 500 ticked down 0.9% today, to end April up 12.7%—its largest one month percentage gain since January 1987. The Dow Jones Industrial Average dropped 1.2% today, for a 11.1% gain in April, and the Nasdaq Composite slipped 0.3%, to close the month up 15.4%.

The Department of Labor reported this morning that another 3.8 million people filed initial claims for unemployment benefits last week, bringing the total newly out of work since the coronavirus struck the U.S. economy to more than 30 million. A separate report showed that consumer spending fell 7.5% in March from a month earlier—the biggest monthly drop on record—as many consumers held back on all but essential purchases.

Across the pond, data showed that eurozone GDP dropped 3.8% in the first quarter. Christine Lagarde, head of the European Central Bank, warned that the region's economy could contract by 5% to 12% this year, depending on how long economically disruptive efforts to contain the spread of coronavirus remain in place. The ECB said it would lower interest rates on existing loans to banks and offer new long-term loans, but chose not to scale up a bond-buying initiative called the Pandemic Emergency Purchase Program. Investors were disappointed, having hoped the size of the program would be increased.

European stock indexes fell after Lagarde spoke, with beleaguered European banks especially hard hit by the announcement. The Euro Stoxx 600 index closed down 2%, while the Euro Stoxx Bank Index fell another 5.5% today after already having lost nearly half its value since February.

Amazon.com and Apple added their first-quarter reports to the parade of earnings releases out this week. Contrary to strong results from fellow tech behemoths Alphabet, Facebook, and Microsoft over the past two days, theirs were decidedly more mixed.

Amazon's revenues soared from a year ago as stuck-at-home consumers ordered more goods on the website, but costs also jumped as a result of new safety measures and other coronavirus-related expenses. Apple beat Wall Street estimates, but suffered a 7% drop in iPhone sales and withdrew its guidance for the rest of the current quarter. Both companies' shares were down in after-hours trading.

Still, three out of five ain't bad. And there was quietly a lot riding on how big tech did over the past three days. The group is responsible for a nearly a quarter of the S&P 500's market value, up several percentage points from the start of the year. For comparison, the entire beaten-down energy sector is under 3% of the index's market value.

So just a 5% drop for the big five would take a nearly 50% tumble for the energy sector to have the same impact on the S&P 500.