Tech stocks continued their bloodletting Monday (April 2), with everything technology related slumping, extending what is now a three-week decline as fears mount that these stocks are no longer the darlings of Wall Street and investors.
According to The Wall Street Journal, FAANG stocks (Facebook, Amazon, Apple, Netflix and Alphabet, the parent company of Google) have lost a combined $78.7 billion in market value on Monday (April 2), bringing the declines to $397 billion since March 12 when the FAANG stocks peaked. But it wasn’t just the FAANG stocks that were feeling the pain. The declines spread across the tech sector, with everything declining — be it a semiconductor company or a payment one — reported the WSJ, pointing out that every stock in the S&P 500 technology sector ended the day lower. The selloff also spread into other industries, with 11 of the S&P 500 sectors down and 28 of the 30 components of the Dow Jones Industrial Average also declining.
“Facebook was a golden child, the one everyone on the Street knows,” Paul Karrlsson-Willis, a managing director and head of global equity sales and trading at Cabrera Capital, told the WSJ. That was, until it revealed two weeks ago that Cambridge Analytica, the political consulting firm that worked on Donald Trump’s presidential campaign, accessed the data on 50 million users without their consent. Since then, worries have spread that other tech companies could have similar issues, Karrlsson-Willis and other investors told The Wall Street Journal.
Up until the past few weeks, tech stocks had been leading the market higher as other sectors suffered from negative news. That has changed in recent weeks and isn’t only because of Facebook’s latest woes. Amazon’s stock plunged more than 5% Monday (April 2) after Trump intensified his criticism of the company’s business practices. Meanwhile, Tesla, the green car maker, was also down more than 5% after getting slammed by the National Transportation Safety Board about disclosures it made dealing with a crash that left a driver of one of its vehicles dead. Facebook’s stock was down nearly 3%. In addition to concerns about regulators, traders told the paper that technical factors are also playing a role in the sell-off. For example, the S&P 500 closed lower than its 200-day moving average on Monday (April 2), marking the first time since June of 2016. Back then, the UK voted to leave the European Union, noted the report. The dip below the 200-day moving average could mean more volatility is ahead.
Despite the sell-off, the WSJ said investors are optimistic about the long-term growth prospects for the tech sector. After all, tech companies that are part of the S&P 500 are expected to weigh in with strong quarterly earnings of 22% in the first quarter, which would be higher than the 17% earnings growth expected out of the S&P 500 companies overall.