After a lackluster week in response to a poor showing from Alphabet (NasdaqGS: GOOGL) and Microsoft (NasdaqGS: MSFT), technology sector exchange traded funds could experience another trying week with Apple (NasdaqGS: AAPL) and Facebook (NasdaqGS: FB) up to bat.
Google parent company Alphabet and Microsoft lost $30 billion each in market cap after their weak first quarter results, dragging on the broader tech sector. Over the past week, the PowerShares QQQ (NasdaqGM: QQQ), which tracks the tech heavy Nasdaq-100 Index, fell 1.5% and the Technology Select Sector SPDR (NYSEArca: XLK), which follows tech names in the S&P 500, dropped 2.0%.
Tech investors will be watching for Apple’s first quarter announcement on Tuesday, April 26 after the close. However, the outlook doesn’t look too promising. Some project the first year-over-year decline in iPhone unit sales.
Analysts have already lowered iPhone estimates in recent weeks, pointing to weakness from Apple suppliers and checks within the supply chain that indicate weak iPhone builds, reports Jennifer Booton for MarketWatch.
Raymond James analyst Tavis McCourt lowered iPhone sales estimates to 212 million on “meaningfully lower” average selling prices, compared to 231 million last year.
Moreover, there are signs that consumers are upgrading phones less frequently, along with a slowdown in demand and expectations that the new iPhone 5SE and Apple Watch are not taking off.
Want more news on Equities ETFs? Visit: www.etftrends.com/equities
The current investment environment is also favoring value stocks over growth tech names.
“It seems like a rotation on a lot of different levels,” Convergex Nick Colas told CNBC. “It’s a bigger issue [because]it looks like big cap tech is kind of becoming yesterday’s news.”
Facebook will report results on Wednesday, April 27. Market observers, though, expect the social media company to announce improved ad revenue, especially from its mobile advertising platform.
“While there have been a lot of chatter and speculation back and forth in recent weeks about ad trends and how they impacted this Facebook quarter, all the news this week pointed toward positive results,” TheStreet‘s Jim Cramer, portfolio manager of the Action Alerts PLUS charitable trust portfolio, and Jack Mohr, research director, said in a note.
Market cap-weighted tech sector ETFs have a large weighting in the two companies. For example, QQQ has a 11.4% tilt toward AAPL and 4.9% in FB. XLK holds 14.1% AAPL and 6.1% in FB.
[related_stories]PowerShares QQQ