Technology stocks and sector-related exchange traded funds lagged the equities market on Thursday as investors rotate out of the growth style and a stronger dollar crimps the sector’s outlook.
The PowerShares QQQ (NasdaqGM: QQQ), which tracks the tech heavy Nasdaq-100 Index, dropped 1.6% Thursday while the Technology Select Sector SPDR (NYSEArca: XLK) fell 2.0%. Over the past month, QQQ gained 0.4% and XLK added 0.2%.
Meanwhile, inverse or short tech ETF plays jumped, with the Direxion Dialy Technology Bear 1x Shares (NYSEArca: TECZ) 1.2% higher. For more aggressive traders, the Direxion Daily Technology Bear 3X Shares (NYSEArca: TECS) jumped 6.2% and the ProShares UltraShort Technology (NYSEArca: REW) gained 4.2%.
Weakness in Facebook (NasdaqGS: FB), Microsoft (NasdaqGS: MSFT) and Apple (NasdaqGS: AAPL) dragged the Nasdaq to near a two-week low while the S&P 500 Technology Index experienced its worst daily performance since August, reports Yashaswini Swamynathan for Reuters.
QQQ includes a large 10.7% tilt toward AAPL, along with 8.4% MSFT and 4.9% FB. XLK also holds a 13.4% position in AAPL, 10.6% MSFT and 6.2% FB.
“I think what you are seeing is people moving out of names that have been winners in the past couple of years and from companies that have predictable growth such as Facebook, Alphabet and Apple,” Michael Scanlon, managing director of Manulife Asset Management, told Reuters.
Ever since Donald Trump won the presidential elections, technology stocks have barely moved, returning a paltry 0.6%.
Furthermore, President-elect Trump’s fiscal policies could bolster growth and fuel inflationary pressures, which has prompted speculation of Federal Reserve interest rate hikes and a strengthening U.S. dollar. Consequently, with an appreciating USD, large multi-national companies could experience lower profits and sales in overseas markets, and technology companies in the S&P 500 receive almost 60% of their revenue outside the U.S., the Seattle Times reports.
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