Wall Street’s largest tech and internet stocks, after leading it higher for most of the year, have been among the most laggards’ stocks in the market recently for traders. Facebook, Amazon, Netflix, Google (of Alphabet Inc.) stocks have dropped quickly this month because of disappointing growth outlooks have out-weighed the assumption that their valuations are supported by fundamentals, with the one-time trading favorites Amazon.com Inc. and Netflix Inc. have seen particular weakness getting an equally aggressive move to the downside as it was to the upside based on the momentum.
Bruce Bittles, chief investment strategist at Baird & Co. says ‘Google-parent Alphabet Inc. and Facebook Inc. which are other FANG stocks that have also seen double-digit drops in recent weeks, which is also driven by the sell off in the US.’ The market is now taking a break from these otherwise loaded names just what is seen in the marijuana industry. The downside momentum is so strong that any attempt at a rally fades, investors and traders keep calling the bottoms and every time they get hurt and the fall, however, still hasn’t caught up to the fundamentals.
He said in a phone interview ‘Until 90 percent of the trading volume in a single session is to the upside, Bittles said he won’t feel like the tide has turned. He is looking for a submission and then a rally and otherwise it seems like the deterioration seen under the major averages are caught up by the market’s narrow leadership.’
Even as the broader market rebounded, Amazon fell with its third straight daily drop as much as 4.1 percent on October 31, 2018. For its worst month since November 2008, the company remains on track, and the sell-off has gone to its lowest intraday levels since April. Meanwhile, extending its own three-day slide, Netflix fell as much as 4.8 percent, and the stock’s worst monthly performance since April 2012.
Below their 200-day moving averages last week, shares of both companies fell but are still sharply higher on the year, suggesting there is still plenty of room for downside. Investors are paying renewed attention to fundamentals particularly in a potential worsening trade war and an uncertain environment marked by rising interest rates. One reason that investors have begun to hinge to old tech names that have slower growth, but less-rich valuations, as Amazon and Netflix look expensive by traditional standards, said Michael Matousek, head trader at U.S. Global Investors Inc.
Matousek said in a phone interview ‘People started asking why they should pay 90 times earnings for 30 percent growth, after Amazon report’. Everyone started selling which caused the stock to break under key support levels that had been holding and keeping them interested. Netflix trading below $280 broke below that level Tuesday, Amazon’s April low comes in around $1,372, while it is about $1,010 for Alphabet on a closing basis. With Facebook’s earnings coming soon, the next test for the group comes soon after the close.
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