Email of the day on technology shares underperforming
Any idea why NASDAQ 100 dropped 50+ points yesterday?
This has been a spectacular year for some technology shares, with companies like Nvidia performing beyond the expectations of even the most ardent bulls. However the prospect of rising interest rates is potentially an issue for companies that are reliant of cheap financing to fund growth.
Meanwhile the market is an international beauty contest and the financial sector is looking prettier right now relative to some highflying technology shares which have been in the limelight for a long time already.
A rotation is clearly underway and the shares pulling back fastest are those with clear overextensions relative to their respective trend means. The list of today’s leading decliners suggests investors are taking profits where they have had good runs and are potentially redeploying into sectors that benefit from fiscal stimulus; banking, insurance, defence, infrastructure development and consumer discretionary spending.
A considerable number of weekly key reversals are evident in shares like Applied Materials, LAM Research, Microchip Technologies, Analog Devices and even Nvidia has now posted its first clear downward dynamic.
At the other end of the spectrum some of the largest cap constituents have been comparatively steady but will need to continue to hold in the region of their trend means if medium-term uptrend consistency is to continue to be given the benefit of the doubt.