Cash continues to pile out of the much-loved tech names as investors assess a summer of soaring prices.
Following the market holiday, the momentum and megacap stocks are in the crosshairs again, with Nasdaq futures (NDX:IND, -3.4%) slumping.
Only the classic defensive SPDR Utilities Index ETF (XLU, +0.2%) is showing any semblance of strength as money flows into bonds, pushing rates down. The 10-year Treasury yield is at 0.68%, down about 4 basis points.
The technology sector in now in a correction from its recent highs, unofficially defined as a 10% drop. The SDPR Information Technology Sector ETF (XLK, –3.5%) is off 10.3% from the high it set on Sept. 2.
At around $114, XLK is also approaching its 50-day simple moving average of $112.03. The sector is still up 25% in the last six months.
The chip sector is the hardest hit, with high-flyer Nvidia (NVDA, -6%) getting hit hard in premarket trading. AMD (AMD, -4.6%) is also among the biggest losers.
Nvidia is down 17% from its high on Sept. 2, while AMD is down 15%. The iShares Philadelphia Semiconductor Sector ETF (SOXX, –3.4%) is off 9.5% from its highs, while the VanEck Vectors Semiconductor ETF (SMH, -3.2%) is down 9.7%.
The megacaps are also feeling the heat. Apple (AAPL, -6.5%) is the worst performer in XLK before the bell. It’s down about 14% from recent highs and will open around 6% away from its 50-day SMA. Microsoft (MSFT, -3.5%) is down 7.5% from its Sept. 2 high.
But many strategists are comfortable with the recent action in these stocks, given their freight-train performance during the summer, with many of the stocks seen as growth and defensive at the same time.
“The fundamentals of those big five stocks have been terrific this year,” Chris Marangi, co-CIO at Gabelli Funds, told Bloomberg, noting that the current correction is “healthy”.
“The market has had a huge move since March 23. The Nasdaq is up something like 70%. That’s a melt-up. It’s not as big as what we had in 1999 when we had over 200%. But I wouldn’t want to see a repeat of that. So, I’m actually somewhat comforted by the market taking a break here,” strategist Ed Yardeni told CNBC last week.
Industrials (NYSEARCA:XLI) may have a chance to step up given the pressure on growth today. Honeywell, a new Dow components will host another live leadership webcast at 2 p.m. ET.
This installment will feature a conversation between John Waldron, CEO of Honeywell Safety and Productivity Solutions, and Wolfe Research analyst Nigel Coe.
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