NASDAQ Tumble Through Just 5 Stocks.

When it comes to the ongoing technology beat-down in the stock market, it appears not all shares are created equal.

Indeed, just five names account for nearly 75 percent of the drop in the Nasdaq Composite Index, which has fallen more than 2.1 percent since June 7. Meanwhile, the Dow Jones Industrial Average and S&P 500 Index are roughly unchanged over the same time frame.

Much of this dynamic is due to giants like Apple Inc., Microsoft Corp. and Goggle parent Alphabet Inc. falling as much as 6.5 percent. Add Facebook and Amazon to the mix and those companies account for nearly 30 percent of the index’s weighting, and their outsize impact has driven the gauge lower even though the bulk of the stocks are doing fine.

This selloff was “way overdue given the extreme out-performance and positioning in technology shares,” Morgan Stanley analyst Michael Wilson wrote in a note to clients Monday, Shares of Apple, for instance, are still up 25 percent this year, giving them room to fall.

But while Wilson expects the drubbing to continue in the short-term, he doesn’t think the market has seen a peak in tech shares.

“We would be surprised if this is the end for technology stocks given the very strong earnings growth we are witnessing,” he wrote.

Analysts now believe performance in technology will depend on the economic outlook. And if conditions change, finance will be the likely beneficiary.

“If the current economic ‘Goldilocks’ environment persists, technology and other growth stocks should continue to outperform, despite today’s price declines,” Goldman Sachs Group Inc. analysts led by David Kostin wrote in a note to clients late Friday. “However, if investors recalibrate expectations for inflation and Fed policy to match the growth optimism suggested by the S&P 500 level, higher rates should lead to financial sector outperformance.”

Cheerio.

The Pinstripe and Bowler Club shares information with MF Solutions Ltd.

 

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Stock Drop

Tuesday’s selloff in stocks was wonderfully brief, reinforcing two hypotheses that have served investors well for several years now: that markets are extremely resilient, and that any notable market dip should be treated as a buying opportunity.

But this should not distract from the information contained in the list of suspects that analysts put forward to explain the first 1 percent loss in the S&P in more than 100 days.

For some, the most likely suspect for Tuesday’s selloff was the Republican Party’s failure to unite quickly behind the health-care bill proposed by House Speaker Paul Ryan and backed by President Donald Trump. They saw this as an indication of the difficulties the president would subsequently face in getting his pro-growth agenda through Congress, including tax cuts.

Others blamed the White House for the decision to start its congressional campaign with the health-care overhaul in the first place, given its inherent complexity and controversial history. These analysts argued that tax reform would have faced an easier ride, building momentum for what followed. Now, divisions over health care, even if resolved at the last moment, could bode badly for what next goes to Congress.

There were some who extended their political reasoning to include the uncertainty over the remaining elections in Europe, especially in light of the influence of anti-establishment movements. Britain’s specification of a date for triggering Article 50, beginning negotiations over its exit from the European Union, provided further support for this view.

Yet another explanation saw the selloff as a delayed response to the Federal Reserve’s interest-rate increase. Combined with the solid prospect for two more hikes, this was read as a sign that the central bank is less willing and less able to continue to support asset prices.

A fifth group noted that some type of stock correction was long overdue. After all, measures of both actual and implied volatility have been extremely low, with markets having seen until Tuesday virtually no day of meaningful retrenchment since October, an unusually long period.

A final investor perspective focused on the end of the Japanese fiscal year this month — an event that, according to this view, is enticing some portfolio risk shedding.

In reality, all of these factors could have played a role. But rather than dismiss them as irrelevant because the market selloff has been contained so far, this list should serve as an important reminder that stocks have managed to overcome many headwinds as they continue to bet boldly on a surge in growth, earnings and repatriated capital.

As with Hercule Poirot in Agatha’s Christie’s “Murder on the Orient Express,” we have good reasons to believe that all the suspects on the list played a role. But the victim in this case has not been hurt, let alone gravely — at least as of now.

Cheerio

The Pinstripe and Bowler Club shares information with MF Solutions Ltd