By Nicholas
Jasinski | Thursday, September 3
Bursting. Momentum
works until it doesn’t.
Technology
investors got a harsh reminder of that today, as tech-related shares
plunged with no clear and specific cause. The drop could have just
as easily come yesterday, or not for another week. That’s just what hot
stocks or sectors tend to eventually do after long and steady rallies—they
give back some of their gains as investors take profits.
And
investors in tech have lots of profits to take. A market-beating stretch for
the stocks that began as the pandemic slammed the economy only accelerated in
August, so some pullback could have been expected.
The S&P
500 technology sector closed down nearly 5.7%.
The index as a whole lost 3.5%, while the tech-heavy Nasdaq
Composite dropped 5%—its greatest one-day loss since
March. The Nasdaq was up 61% in the five months before today, well ahead of
the S&P 500’s 42% rise.
The Dow
Jones Industrial Average saw its tech weighting drop after Apple split
its stock last week. The index closed down 808 points, or 2.8%, today.
The losses
for some individual tech stocks were much larger. Apple, which had rallied
118% in the past five months, closed down 8% (more on that below). Amazon.com dropped 4.6%, Facebook lost 3.8%, Microsoft tumbled 6.2%, and Alphabet fell
5.1%.
Software and
cloud-related companies—the stocks that have led the market higher since it
hit its 2020 low in March—were among the biggest losers. Salesforce.com dropped 4.3%, PayPal
Holdings fell 2.8%, and Adobe fell 4.9%.
Stay-at-home
winners Zoom Video Communications and Netflix lost
10% and 4.9%, respectively.
Semiconductor
stocks were also hard hit. The iShares PHLX
Semiconductor ETF (SOXX) closed down 5.6%. Big losers included
Nvidia, down 9.3%; Advanced
Micro Devices, off 8.5%; and Broadcom, which
closed 6.1% lower.
Some of the
most beaten-up and riskiest stocks on the market, conversely, made
better places to hide today, Ben
Levisohn wrote. The best performer in the S&P 500
today was the cruise line Carnival.
Whether the
tech selloff deepens and continues in the coming days is a tough call. The
factors that have boosted the group since March remain firmly in place:
ultralow interest rates that make future cash flows worth more today, a
pandemic that gives an advantage to companies that don’t rely on
in-person interactions for their sales, and a hunger for growth among
investors during a recession.
But given
tech’s prolonged outperformance, all of those benefits come at a much higher
price tag than they did just months ago. Two rational investors judging the
tech-stock opportunity today can walk away with opposite and equally valid
conclusions.
Time will
tell.
 |
DJIA: -2.78% to 28,292.73
S&P 500: -3.51% to 3,455.06 Nasdaq: -4.96% to 11,458.10
The Hot
Stock: Carnival +5.2%
The Biggest Loser: Qorvo -9.8%
Best Sector:
Energy -0.7%
Worst Sector: Technology -5.7%  |
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