After the sell-off on Friday led by a plunge in technology shares, U.S. equities and stock exchange traded funds continued to weaken Monday, with the tech sector dragging on the broader markets yet again.
The S&P 500 Index, along with related funds including the SPDR S&P 500 ETF (NYSEArca: SPY), iShares Core S&P 500 ETF (NYSEArca: IVV) and Vanguard 500 Index (NYSEArca: VOO), were 0.2% lower Monday.
Technology companies in the S&P 500 were among the worst performers Monday, falling off 1.1% after at 2.5% decline in the previous session.
Market observers speculate that the sell-off in tech shares was triggered by profit taking after technology companies led this year’s rally and is on track for their best yearly performance since 2014, which prompted concerns of pricey valuations in a handful of stocks, notably among large names like Apple (NasdaqGS: AAPL), Facebook (NasdaqGS: FB), Amazon (NasdaqGS: AMZN) and Alphabet (NasdaqGS: GOOGL).
“The real heavy lifting, or 40 percent of the move, that we saw was really on the back of a handful of technology stocks,” Art Hogan, chief market strategist at Wunderlich Equity Capital Markets, told Reuters. “So when you have a trade that is so crowded that unwind becomes as dramatic as the one we saw on Friday.”
Analysts have also cited a series of critical research notes of prominent players like Apple as the trigger for the selling as the sector “was ripe for a pullback of some sort,” Mark Luschini, chief investment strategist for Janney, told the Wall Street Journal.
Some are worried that the two-day drop represents more than a mere pause and may reflect fundamental cracks in the U.S. bull market.
“There’s a chance U.S. internet technology stocks that have propelled a global stock rally will now serve as a buzz kill,” Mitsuo Shimizu, deputy general manager at Japan Asia Securities, told Bloomberg.
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