Big Tech Slammed Again As Rotation Continues


As the saying goes, the bigger they are, the harder they fall.

That seems to be the case in technology stocks this week as large-cap members of the big indexes get hammered while other parts of the market hold their ground.

Notice on the RadarScreen® below that the Nasdaq-100, whose constituents have the highest market caps, is lagging the smaller-focused Nasdaq composite today and over the last month. The same is true for the Russell 2000 small-cap index and the S&P 400 Midcaps. You can also see how this breaks with the pattern over the longer year-to-date period.

RadarScreen® with select indexes.

Did you miss our special report on the shift to smaller companies? Click here for access.

Semiconductors are leading the selloff. While there don’t seem to be any headlines behind the drop today, the news flow has grown more bearish on the group recently. Analysts have fretted about slowing business at chip-equipment companies like Applied Materials (AMAT) and Lam Research (LRCX) since the last set of earnings over the summer.

Editor’s note: After this post was published, we learned that bearish commentary from Micron Technology (MU) and KLA-Tencor (KLAC) contributed to the decline.

Additionally today, the Semiconductor Industry Association said global sales rose just 17.4 percent in July. That appears to be the smallest gain since February 2017. China, whose economy keeps showing more signs of a slowdown, is the other nagging issue for chips.

Then you have the big “FANG” stocks: Facebook (FB), (AMZN), Netflix (NFLX) and Alphabet (GOOGL). About two weeks ago, MarketWatch reported hedge funds were scaling back from this group. The selling continues today as company executives try to defend themselves before Congress.

FB and NFLX, it will be recalled, fell sharply after their last results on margin worries and slowing growth.

Still, despite the weakness in Tech, clients might want to remember that Apple (AAPL) is expected to unveil a new suite of iPhones on September 12. Will the current selloff provide entries for the smart phone giant?

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David Russell is VP of Market Intelligence at TradeStation Group. Drawing on 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 apprised 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.