Tech Stock Plunge, Little Respite in Sight!
The dizzying drop in tech stocks only got worse yesterday, dragging down large U.S. indexes as investors concerns about the health of the economy crescendoed after the Fed hiked rates on Wednesday. The tech sector (XLK) fell 0.5%, losing more altitude, in a downslide that began last Friday. The stock of Apple (AAPL) ended off 0.6%, Google (GOOGL) recording losses of 0.8% after bearish reports from analysts covering the two large tech companies. The damage was done and the oft-abbreviated stocks known as FAANG – FB, AMZN, AAPL, NFLX, GOOGL – closed beneath Wednesday’s bottom.
The consumer cyclical sector (XLY) fell 0.5%, Amazon (AMZN) shedding 1.3%. Nike (NKE) plunged 3.2% after announcing that it would cut 2% of its global work force and slash 25% of its shoe styles.
Despite the latest declines, the tech sector has still provided the best yields year-to-date; at the same time, bulls should be alarmed. The market has not seen a 10% correction in a very long amount of time. Macro figures are seeing a quicker and quicker downtick with energy prices down again and seasonality – in general – now working against the market, June historically being one of the worst performing months, with the May – October timeframe thought of as the weaker half of the year. More than anything, the focal point now is high market valuations, which are primarily rooted in expectations for a wave of reforms from the Trump White House, which to date has proven itself far from capable in implementing its campaign agenda.
Furthermore, even the justifications for a surge in tech stocks harking back to the beginning of the year are losing more and more substance. Apple’s smart “HomePod” speakers haven’t really taken off. Analysts at Canaccord downgraded Google because of its high valuation and its assessment that it will be hard for the company to repeat the mobile and YouTube advertising growth recorded over the last 2 years. Likewise, Netflix is facing expensive production costs, increasing competition and tepid subscriber growth.
The latest tech sector casualty on Friday was Snapchat (SNAP) which closed sharply off by almost 5%, a little above $17 per share, the stock’s issue price a number of months ago. Traders will be carefully following the stock to see whether it will break beneath this level today.
In Summary for the Day: The Dow Jones fell 0.07%, the S&P 500 slipping 0.22%, and the NASDAQ dropping 0.47%.
Financial and energy stocks, sectors that typically thrive when the economy expands, also saw selling pressure. Financial stocks (XLF) shed 0.4%, energy stocks (XLE) continuing to fall after having seen a prior sell-off on Wednesday, the sector falling another 0.7% this time around. In contrast, utility stocks (XLU) and retail stocks, which pay the highest dividends, rallied 0.6% and 0.5% respectively, making them the strongest sectors on the market. If the strongest performance on the market comes from these two sectors, that’s a sign that interest rates are dominating stock market movement.
The energy sector was the worst-performing yesterday, with losses of 1.8% after crude saw substantial weakness. Crude ended off, with sharp losses of close to 4%.
One of the stocks that stood out in yesterday’s trading was Kroger (KR), which tumbled 18.9% after the company slashed its full-year earnings forecast.
About 6.5 billion shares changed hands yesterday, beneath the 6.8 billion average over the last 20 trading days.
Friday: Friday is likely to be more volatile than usual. First-off, it’s triple witching day, the expiration of index, stock and future contract options likely to increast volatility, especially in the second half of the trading day. Tech stocks will be in the limelight after their most recent declines. Lastly, crude continues to be stuck beneath the $45 barrel level, something that could impact market movement were it to fall beneath $40 a barrel. On Thursday, crude fell to a new 7-week low, closing at the $44.46 barrel level, beneath the key $45 psychological level.
Friday’s economic figures will include building permits, and starts, at 8:30 N.Y. time. Also on the roster, the University of Michigan Consumer Confidence Index will be released at 10:00.
Friday’s Hot Stocks: FNSR, BAH, FOSL, ALR
Have a great trading day!
|Wednesday||10:30||Crude Oil Inventories||–||Low|
|Wednesday||14:00||FOMC Rate Decision||–||High|
|Thursday||8:30||Export\Import Prices ex-ag.||–||Medium|
|HRB||H&R Block, Inc.||PM||Tuesday|
|JBL||Jabil Circuit, Inc.||PM||Wednesday|
|KR||The Kroger Co.||AM||Thursday|
Today’s Picks – Day Trading!
New York Strategy Swing
Today’s Picks – Swing “New-York Strategy
No.1 – SBUX
|Sector||Services | Specialty Eateries|
No.2 – YHOO
|Sector||Technology | Internet Information Providers|