The Dow (DJI) decided that, on a work night, after weeks of not feeling too hot, it should have a night on the town. After several brewskis, three long-islands, and something called a “dirty mark-tini,” the Dow (DJI) was done for the night. “I think I need to call a cab,” the Dow said, as the sentiment fell on the deaf ears of the other patrons of the bar. The car arrived, the Dow went home and passed out within moments of hitting the pillow.
When the index awoke Wednesday morning, it was covered in bruises and cuts, having fallen 600 points, a 2.4% drop. The Dow checked its phone to discover that its fellow indices, the S&P 500 (SPX) and the Nasdaq both fell 3% and 4% respectively, with the Nasdaq’s (IXIC) drop the worst since August 2011.
As a result of the Nasdaq’s injuries, the tech-heavy index saw many of its holdings suffer disappointing losses as well. Though Netflix started off with strong earnings last week after the announcement of a boost in subscribers, it was fugacious occurrence for Netflix and the FANG stocks Facebook (FB), Amazon (AMZN), and Google (GOOG). The popular streaming site fell more than 9% on Wednesday, down a total of 17% for the week thus far.
Choose Your Tech Stocks Wisely, Young Padawan
Market concerns are largely based on worries of rising interest rates, reactionary regulating of data in response to Facebook’s (the F in FANG) unresolved data issues, as well as the ongoing trade war between the U.S. and China.
- Facebook’s (FB) shares fell 4%, closing at $146.04 per share
- Amazon (AMZN) dove 5%, trading at $1,664.20 per share,
- Apple (AAPL), set to report earnings early next week, fell 3%, closing $215.09 per share
In the past, investors and analysts have revered tech stocks for their strength and immunity from market trends, but some believe that tech is destined to turn bearish given its success over the last decade.
“You didn’t have to be discerning with tech before since it has been doing so well for the past decade. But now, people have to look at the various valuations and how each company is doing.”
–Sylvia Jablonski, institutional ETF Strategist, Direxion
The key concern for tech sector market fanboys relates to internet privacy laws and how companies like Facebook and Google are in the doghouse until they prove to consumers that their user data is safe from cyber-terrorism.
In the case of Google (GOOG), the industry-leading search engine has faced massive criticism for its failure to disclose what information it records from its users. According to an Associated Press investigation conducted in August, “Google saves your location history even if you’ve paused ‘location history’ on mobile devices.” The investigation goes on to point out that by storing your “minute-by-minute travel information,” Google (GOOG) has assisted local police in determining the location of suspects. While valiant, this represents a major risk for consumer privacy, and investors like their privacy, let me tell you.
Amazon (AMZN), Though…
As privacy scandals arouse increased regulations for major tech companies, market concerns are spreading through space like a virus. Meanwhile, Amazon (AMZN) is proving unstoppable, with the company making move seemingly every day. As of Tuesday, the world’s leading e-commerce site is up 49% year-to-date, as it plans to expand its global grasp with the building of its new HQ2 headquarters. The company will reportedly release the location of its new campus before the end of next month, with leading locations including Austin, Boston, and Northern Virginia.
The creation of the new location will cost approximately $5 billion and will create 50,000 more employment opportunities for the company. Recent reports indicate that Amazon (AMZN) is one of the most desirable companies to work for, and HQ2 will surely keep this allure alive.
Closing Thoughts
The fate of the tech sector is not written in stone. As we look to the future, we will hopefully see an end to the U.S./China trade war, ultimately resulting in lower debt yields and decreases in interest rates. If anything, the recent downward trend of major U.S. indices represents nothing more than a panic attack “rather than the beginning of a bear market,” according to CNBC analysts.
It’s always darkest before the dawn and the Dow, members of the FANG group, and our spirits will rise again.
