The trading week after the Thanksgiving holiday saw technology end on a sour note, which allowed the bearish Direxion Daily Technology Bear 3X ETF (TECS) to jump higher.
Technology stocks were the toast of the town when COVID-19 first arrived on the scene last year, with social distancing measures forcing more individuals to rely on technology. Whether it was videoconferencing, online retail, cloud computing, or other tech-related companies, the pandemic propped up these stocks.
TECS rising 5% during last Friday’s trading session begs the question of whether technology has lost its mojo amid the newly identified COVID-19 variant, Omicron. It could be that investors are over the euphoria of tech or over the pandemic in general, regardless of what new variant decides to surface.
“The sharp selloff suggests investors are betting that, no matter what happens with omicron, the U.S. is done with the shutdowns that boosted food delivery and streaming TV services while forcing people to collaborate remotely for work and chat endlessly by video with friends and family members,” CNBC reports.
TECS seeks daily investment results, before fees and expenses, of 300% of the inverse (or opposite) of the daily performance of the Technology Select Sector Index. The index is provided by S&P Dow Jones Indices and includes domestic companies from the technology sector.
Nasdaq 100 and TECs Zigzagging
The Nasdaq 100 ended last week’s trading session down about 2%. That, in turn, fed into strength for TECs, which ended the trading week up just under 1%.
While investors might feel that certain tech companies have maxed their pandemic potential (like Zoom, which fell 16.5% last week), they’re now looking towards quality to supplant tech names that powered through 2020. That’s not to say that they’re avoiding tech en masse, but quality stocks like Apple and Microsoft are expected to remain darlings in the sector.
“There’s a flight to quality with companies that you know will weather the storm, not go bankrupt, not have financial distress,” said Needham analyst Laura Martin.
However, Omicron can’t get all the blame. There’s also still inflation and rising rates, which took a back seat to the new variant, as well as year-end profit-taking.
“It’s been a wild one,” said Byron Deeter, a partner at Bessemer Venture Partners. “You can look at four causes. You can look at omicron. You can look at inflation. You can look at interest rates. And you can look at profit-taking.”
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