In the wake of Donald Trump's surprise election a week ago, the stock market has divided in half. One of those halves is soaring, the other... not so much.
Tech is the not so much — and its losses have been heavy since the market's bull run beginning when Trump acceded to president-elect status. The concerned consensus is that Donald Trump's immigration and trade policies will take a bite of tech firms' earnings to come.
Apple Inc., Facebook Inc. and Alphabet Inc. led the S&P 500 Information Technology Index down 1.7 percent in what was its biggest retreat since September — and that cluster of firms sticks out particularly, since the old normal was that these firms tend to rise in sync with the economy as a whole. Tech stocks in the benchmark equity gauge have slumped 3.1 percent over four days, trailing the S&P 500 Index by 4.2 percentage points, the most since May 2009.
Again, all of this is a pretty big reversal for tech — which is the largest group in the S&P 500 and one of the only ones to consistently post earnings growth over the last 18 months. Insiders — apart from citing trade and immigration issues — are in some cases also flat-out alleging campaign retaliation for the fact that Silicon Valley and its denizens overwhelmingly broke for Hillary Clinton during the election cycle.
“Technology provides the productivity gains for the global economy and many of the large-cap names like Apple and Amazon were carrying the torch for the market,” Channing Smith, a managing director at Capital Advisors Inc. in Tulsa, Oklahoma, said by phone. The firm oversees about $1.8 billion. “Without their participating, that’s definitely going to create a headwind for the market.”
Headwinds that could be buttressed by the fact that the biggest players are getting hit the hardest. The FANG block — Facebook, Amazon, Netflix and Google (technically it's Alphabet now, but FANA is less cool-sounding than FANG) have each fallen at least 2.4 percent. And the drops just keep on coming — since the election, none of the FANG gang have notched anything but losses, and have instead shrunk 8 percent for the worst retreat since February.
Amazon has been particularly hard hit — since Jeff Bezos found himself in something of a feud with Trump during the election. Trump accused Bezos of purchasing the Washington Post to gain political influence and avoid antitrust scrutiny. Shares of the online retailer have lost more than $30 billion in value since Tuesday’s vote.
“It’s a big deal with what potentially Trump could do,” said Blake Harper, an analyst that covers internet stocks at Loop Capital Markets LLC in Chicago. “If you look at investors in Alphabet, Facebook and Amazon, they’re stacking some type of operationality for them to continue to expand internationally and also expand into other different categories outside their core markets,” he said. “He definitely indicated he would pursue antitrust measures against companies like Amazon. You’d have more restrictive policies to prohibit expansion.”
For now, the market seems to be holding up, with S&P 500 trading within 1.2 percent of an all-time high, as the retreat in tech stocks has been countered by rallies in financial and industrial companies.
Banks were up 2.3 percent Monday, extending their gains since Trump’s victory to 11 percent, while industrial stocks have added 5.2 percent in that time.
“The market is getting ahead of itself here and selling off and being hard on tech,” said Timothy Ghriskey, who helps manage $1.5 billion as chief investment officer at Solaris Asset Management LLC in New York. “Tech is where a lot of gains were, so as money gets shifted around to different sectors, meaning into financials and into health care and industrials, it has to come out of somewhere and a lot of it has come out of tech.”