Technology and the Nasdaq Turn Negative for the Year as Reopening Triggers Broad Rotation in the Stock Market
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The Nasdaq-100 just sank into negative territory for the year as investors dump the same technology stocks that boomed during the pandemic.
The index is now 1.6 percent below its closing price on December 31. That dragged on two important exchange-traded funds (ETFs) with heavy exposure to the Nasdaq. The SPDR Technology ETF (XLK), dominated by Apple (AAPL), is down 0.5 percent on the year. The SPDR Consumer Discretionary ETF (XLY), dominated by Amazon.com (AMZN) and Tesla (TSLA), is about 1 percent underwater.
The selloff followed news that Texas would reopen all its businesses next week. The White House also announced the U.S. will have enough coronavirus vaccines by the end of May. That was two months earlier than projected previously. Translation? Things could be normal in time for Memorial Day and the summer driving season.
Given that kind of outlook, it’s not a surprise investors are dumping all kinds of technology stocks. Just consider the price action in Zoom Video Communications (ZM), one of the biggest beneficiaries of last year’s pandemic. ZM crushed estimates and issued bullish guidance Monday afternoon. It tried to rally on Tuesday morning, but hit a wall of sellers. The same thing happened yesterday.
The current environment has become almost a mirror image of 2020. Sectors like energy, banks, small caps and airlines are doing best. Those are the same kind of cyclical stocks that plummeted last year. Keep reading Market Insights for more on the trend, including information about the shift toward value investing.
David Russell is VP of Market Intelligence at TradeStation Group. Drawing on two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial.
Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them apprised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.
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