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FAANGs Step Into Bear Market: Is a Tech Revival Possible?
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The downward path taken by tech stocks led by the once powerful and popular FAANG stocks had a detrimental effect on Wall Street on Nov 19. While Facebook had negative publicity issues, Apple (AAPL - Free Report) suffered from falling iPhone sales.
Meanwhile, Amazon’s (AMZN - Free Report) fourth-quarter outlook disappointed market pundits. Netflix (NFLX - Free Report) and Alphabet (GOOGL - Free Report) were, in the meantime, hit by a death cross.
At the same time, current geopolitical and economic issues are also weighing on tech bigwigs. Therefore, keeping the scenario in mind, it would be best to stay away from these technology giants for now.
What Triggered the Plunge in FAANG?
FAANG stocks incurred huge losses on Nov 19, dragging markets down as investors rushed to a tech stock sell-off.
The tech-laden Nasdaq Composite fell 3% to close at 7,028.48, while the broader S&P 500 plunged 1.7% to close at 2,690.73 following a decline in tech shares.
The FAANG group officially entered the bear market on the day after dropping more than 20% from their respective 52-week high figures. Facebook and Apple predominantly led the losses. All five stocks have been on a precipitous course over the past six weeks.
Facebook’s shares dropped 5.7% as the company faced more off-putting publicity for the way it dealt with the 2016 election and failed to shield its platform from foreign influence. Per a report by Wall Street Journal, CEO Mark Zuckerberg blamed long-time chief operating officer Sheryl Sandberg over the public scrutiny faced by the company.
Apple’s shares fell nearly 4% after a Wall Street Journal report cited that the company had ordered production cuts for all of its three iPhone models launched in September. The slash in production is indicative of Apple’s inability to estimate the number of handsets that it might sell due to the lower-than-expected demand for the new iPhones.
Amazon dropped 5.1%, but the online retail giant’s shares have been falling since it released disappointing fourth-quarter outlook and revenues on Oct 25. The company’s fourth-quarter revenue guidance was well below the consensus of $73.79 billion, ranging between $66.5 billion and $72.5 billion. The outlook fell short of Wall Street expectations since the fourth quarter is crucial for sales, given the holidays.
Netflix shed 5.55%, encountering its lowest close since Feb 14. The company produced its first death cross pattern in nearly three years. Alphabet’s shares also dropped nearly 4%.
Could There be a Possible Recovery for Tech Stocks?
Tech shares could take time to revive from their plunge primarily due to the prevailing geopolitical and economic tensions worldwide.
According to Shawn Cruz, TD Ameritrade’s manager of trader strategy, U.S.-China trade has been the main catalyst in the markets, in recent times. Per Cruz, "That's really the big driver and that's what you're seeing in tech. These companies have been at the forefront of those U.S.-China discussions."
Unless a definitive solution to the month-long trade dispute is derived, tech shares’ revival is unlikely. Markets had deteriorated further on Nov 19 after Vice President Mike Pence said in a speech on Nov 18 that there would be no end to U.S. tariffs on $250 billion worth of Chinese products unless Beijing amended its ways.
President Donald Trump’s Dec 1 meet with his Chinese counterpart to talk trade, at the G-20 summit, may lead to a positive outcome. However, according to Hannah Anderson, J.P. Morgan Asset Management’s global market strategist, investors should prepare for continued trade conflict.
In addition, the fall in home builder confidence in November and Federal Reserve’s possible December interest rate hike could impact the economy, thus affecting investor sentiment as well. Therefore, the possibility a tech-stock recovery appears rather glum.
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Image: Bigstock
FAANGs Step Into Bear Market: Is a Tech Revival Possible?
The downward path taken by tech stocks led by the once powerful and popular FAANG stocks had a detrimental effect on Wall Street on Nov 19. While Facebook had negative publicity issues, Apple (AAPL - Free Report) suffered from falling iPhone sales.
Meanwhile, Amazon’s (AMZN - Free Report) fourth-quarter outlook disappointed market pundits. Netflix (NFLX - Free Report) and Alphabet (GOOGL - Free Report) were, in the meantime, hit by a death cross.
At the same time, current geopolitical and economic issues are also weighing on tech bigwigs. Therefore, keeping the scenario in mind, it would be best to stay away from these technology giants for now.
What Triggered the Plunge in FAANG?
FAANG stocks incurred huge losses on Nov 19, dragging markets down as investors rushed to a tech stock sell-off.
The tech-laden Nasdaq Composite fell 3% to close at 7,028.48, while the broader S&P 500 plunged 1.7% to close at 2,690.73 following a decline in tech shares.
The FAANG group officially entered the bear market on the day after dropping more than 20% from their respective 52-week high figures. Facebook and Apple predominantly led the losses. All five stocks have been on a precipitous course over the past six weeks.
Facebook’s shares dropped 5.7% as the company faced more off-putting publicity for the way it dealt with the 2016 election and failed to shield its platform from foreign influence. Per a report by Wall Street Journal, CEO Mark Zuckerberg blamed long-time chief operating officer Sheryl Sandberg over the public scrutiny faced by the company.
Apple’s shares fell nearly 4% after a Wall Street Journal report cited that the company had ordered production cuts for all of its three iPhone models launched in September. The slash in production is indicative of Apple’s inability to estimate the number of handsets that it might sell due to the lower-than-expected demand for the new iPhones.
Amazon dropped 5.1%, but the online retail giant’s shares have been falling since it released disappointing fourth-quarter outlook and revenues on Oct 25. The company’s fourth-quarter revenue guidance was well below the consensus of $73.79 billion, ranging between $66.5 billion and $72.5 billion. The outlook fell short of Wall Street expectations since the fourth quarter is crucial for sales, given the holidays.
Netflix shed 5.55%, encountering its lowest close since Feb 14. The company produced its first death cross pattern in nearly three years. Alphabet’s shares also dropped nearly 4%.
Could There be a Possible Recovery for Tech Stocks?
Tech shares could take time to revive from their plunge primarily due to the prevailing geopolitical and economic tensions worldwide.
According to Shawn Cruz, TD Ameritrade’s manager of trader strategy, U.S.-China trade has been the main catalyst in the markets, in recent times. Per Cruz, "That's really the big driver and that's what you're seeing in tech. These companies have been at the forefront of those U.S.-China discussions."
Unless a definitive solution to the month-long trade dispute is derived, tech shares’ revival is unlikely. Markets had deteriorated further on Nov 19 after Vice President Mike Pence said in a speech on Nov 18 that there would be no end to U.S. tariffs on $250 billion worth of Chinese products unless Beijing amended its ways.
President Donald Trump’s Dec 1 meet with his Chinese counterpart to talk trade, at the G-20 summit, may lead to a positive outcome. However, according to Hannah Anderson, J.P. Morgan Asset Management’s global market strategist, investors should prepare for continued trade conflict.
In addition, the fall in home builder confidence in November and Federal Reserve’s possible December interest rate hike could impact the economy, thus affecting investor sentiment as well. Therefore, the possibility a tech-stock recovery appears rather glum.
You can see the complete list of today’s Zacks #1 Rank stocks here.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>