Tech and FANG Languish as Sentiment Shifts

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FANG seems to be losing its mojo along with the rest of tech as sentiment shifts in the market.

FANG, if you don’t know, stands for Facebook (FB), (AMZN), Netflix (NFLX) and Alphabet (GOOGL). This grouping accounted for a big chunk of the market’s gains since the start of 2017, but the last month has seen a dramatic change in where money seems to be going.

Netflix (NFLX) was the first domino to fall on July 17, cratering on signs that its runaway growth had peaked. Facebook (FB) was even worse on July 26, squeezed by rising costs and falling traffic. AMZN and GOOGL fared better, but still drifted aimlessly.

Another stunner came last night when chip giant Nvidia (NVDA) issued weak guidance. While not part of FANG, it has a similar rock-star status and a wide following.

NVDA isn’t the only semiconductor to disappoint. Equipment provider Applied Materials (AMAT) also dropped on weak guidance Thursday afternoon. Throw in a sloppy quarter and manufacturing troubles at Intel (INTC) and a bearish sector call from Morgan Stanley, and a darker picture begins to emerge for the broader space.

Did you see our special report on smaller
technology stocks? Click here for access.

By the way, Micron Technology (MU) is now below its 200-day moving average for the first time in over two years. That follows bearish analysis of the heavily traded chip maker on this week’s Market Action webinar.

Moving on from tech, did you know consumer staples, utilities and healthcare are up almost 4 percent in the last month? Different stories seem to be at work in each.

Data tracker Factset has cited positive earnings trends in utilities, which also tend to follow interest rates. Some key events in recent weeks have caused the market to suspect Federal Reserve officials will be slower to hike interest rates than previously thought. We’re talking about the decline in most other currencies (Turkish lira!) against the U.S. dollar. Higher rates in the U.S. could worsen that trend and hurt our trade balance. In other words, expectations of a less-hawkish Fed tend to help utilities.

Consumer staples have gained on bargain hunting and signs of their businesses stabilizing.

Health-care was perhaps the brightest spot this earnings season as drug makers, HMOs and hospital operators shot to new highs.

Taking a shorter-term view, industrials showed signs of a turn yesterday on hopes that President Trump will soon end his trade war with China. Click here for more.

In conclusion, this isn’t a trade recommendation and everyone needs to do their own homework. But price action and recent headlines suggest investors may be shifting money away from high-profile technology stocks and into new areas.

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David Russell is Global Head of Market Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.