Amazon.com The second week of May has begun and it looks as if stocks will extend their six-week losing streak, the longest since before the pandemic.
For the past six weeks, Apple (stock ticker:
AMZN) lost more than 10% and 30%, respectively, amid a massive market sell-off that particularly hurt the tech sector as the Federal Reserve raised interest rates in an attempt to curb inflation. Apple stock fell 2.7% on Monday, while Amazon stock fell 3%.
“We have been surprised by the scale and speed of the sell-off in tech names this year, as recession fears and the lack of more easy money led by the Fed have sent multiples off a cliff in tech stocks with much pain for the bulls,” he wrote. Wedbush analyst Daniel Ives in a research note.
The last time Apple faced such back-to-back losses was during the eight weeks ending November 23, 2018, when it lost 22.5%. For Amazon, a six-week losing streak ended on August 23, 2019, when it fell 13% over that time period.
Back in 2018, Apple was holding back on concerns about slowing consumer demand for the iPhone XR, as well as weaker-than-expected guidance for the 2018 holiday season. The Federal Reserve played a role as well, with Chairman Jerome Powell talking about continuing to raise interest rates. Today, regardless of Fed hawks, the company is in a different place. The tech giant recently delivered an impressive earnings report, beating expectations across the board, raising its dividend, and expanding its share buyback program.
The stock remains a favorite with analysts – it’s one of Ives’ top picks – although management has warned that supply chain challenges, including the Covid-19 shutdown in China, are making it difficult to meet demand in the short term. But those fears were enough to sow doubts among investors.
“If what Apple is facing is a broader base, then the inventory shortage could eventually translate into reluctance to spend, hampering the positive momentum we are seeing on the demand front,” Deutsche Bank analyst Benjamin Black wrote. Deutsche Bank has received a buy rating on Apple.
Amazon selling is perhaps easier to understand, although it is also unwelcome. The company’s retail and online advertising sales in the first quarter of last year were against estimates, and guidance for the second quarter was similarly downbeat. Conditions are not unlike those that fueled the stock crash in 2019, which coincided with weak second-quarter earnings and concerns about rising tensions between the United States and China.
To be fair, it’s not just Apple and Amazon – they’re tech heavy
It’s down more than 15% over the past six weeks, making it the worst performance in six weeks since April 2020.
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The Google), for example, is down 18.3% over the past six weeks in its worst performance since April 2020.
MSFT) 9.5% over the same time period.
Unfortunately, there could be more pain in the tech sector, said Joe Quinlan, CIO’s head of market strategy for Merrill Bank and Bank of America Private. The pandemic has driven much of these companies’ earnings growth, he said, while higher interest rates have pushed investors away from developing stocks and finding shelter among value stocks.
In the short term, Quinlan is neutral in the sector, but in the long term, he said, “this is the time to start thinking about immersing your toe in technology.”
Ives Wedbush agreed, saying he remains “steadily optimistic” during the market storm, favoring companies that have bet on software, semiconductors, cybersecurity and product-driven cycles, such as Apple. He added that Amazon, Microsoft and Google, in turn, could benefit from the shift towards cloud services.
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