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Tech Shares Hit By Disappointing Results, Impacting The Larger Market

Tech Shares Hit By Disappointing Results, Impacting The Larger Market
Technology stocks have again rattled the financial markets.
A general drop in the technology company shares across the board saw the S&P 500 fall earlier last week while over 2 per cent drop in the Dow Jones Industrial Average and the Nasdaq Composite was also noted.
In terms of market capitalization, the biggest sector in the S&P 500 is the technology sector. Last week, the tech sector was the second-worst performer with a general drop of 2.5 per cent. The decline in the tech sector was triggered by a drop of 5.4 per cent in the shares of Apple because of worries among investors about slowdown in sale of iPhone across the world and especially in the emerging markets. Other tech related shares of companies such as Amazon and Netflix also saw slide of 7 per cent and 5.7 per cent, respectively in addition to significant drops in shares of Nvidia. The drop in shares of Nvidia weighed in heavily on the chips sector as well as impacting the larger tech shares.
Last week, shares of Facebook were also under pressure with a drop of almost 4 per cent because of negative reactions following the publication of a news report in the New York Times related to the manner in which the largest social media platform first ignored and then attempted to conceal the use of the platform by Russian elements with the aim of disrupting the U.S. Presidential election of 2016. In a statement to the article, Facebook COO said: "To suggest that we weren't interested in knowing the truth, or we wanted to hide what we knew, or that we tried to prevent investigations, is simply untrue.”
"The danger of a full retest of the October looks real enough, particularly given that the key technology sector remains at the center of liquidation," said Michael Shaoul, chairman and CEO of Marketfield Asset Management, in a note. "The selling has been driven more by fundamental concerns around a number of key index constituents than technical issues, and there is now a danger that the very long period of Nasdaq 100 outperformance … may finally be drawing to a close," he said.
Lower than expected revenues and disappointing guidance by Nvidia resulted in a drop of 18.8 per cent in the shares of the company which weighed on the entire tech sector. There was also a drop of 1.7 per cent in the VanEck Vectors Semiconductor ETF (SMH) and 3.9 per cent and 1.2 per cent, respectively in shares of Advanced Micro Devices and Micron Technology because of the fall in the shares of Nvidia.
There was also significant pressure on retailers throughout last week. Even as Black Friday approaches, there was a drop of 4.5 per cent in the SPDR S&P Retail ETF. Disappointing quarterly results resulted in drops of 13.7 per cent and 11.2 per cent respectively in the shares of Nordstrom and Williams-Sonoma.
"The market is beginning to reflect ... we're in the late stages of this cycle," said Wasif Latif, head of global multi-assets at USAA. "Historically, large-cap equities seem to be the last place to show that weakness when it's happening."

Christopher J. Mitchell

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