Shares of technology and internet stocks fell on Monday, extending recent declines as investors continued to monitor a rise in Treasury yields.
Losses were widespread across the group, with megacap names, semiconductor stocks and the software sector all tumbling. The group led broad declines in the U.S. equity market, and the Nasdaq 100 Index fell more than 2 percent.
The drop came as the yield on 10-Year U.S. Treasury notes rose to 1.8 percent, the highest in almost two years. Higher rates are seen as a challenge for high-growth and relatively expensive stocks as they reduce the present value of future earnings.
Among the notable movers, Amazon.com Inc. fell 3.4 percent to trade at its lowest intraday since May. The stock has dropped about 15 percent from a November peak and is down for a fifth straight session.
Bank of America affirmed a buy rating and $4,450 price target on the stock, writing that it expects 2022 will “end better than it starts.” The firm has Amazon as its top megacap pick, and it expects various headwinds -- including supply chain and labor issues, decelerating e-commerce growth, and multiple compression -- will “ease throughout the year.”
Google parent Alphabet Inc. fell 2.8 percent and is also down a fifth day, its longest such streak since November 2019. The stock has lost about 8 percent over the five-day drop and it is trading at its lowest since October.
Among other names, Microsoft Corp fell 2.7 percent to its lowest since October. Both Microsoft and Alphabet are coming off their biggest one-week percentage drops since March 2020. Also on Monday, Apple Inc. declined 2.1 percent and Facebook parent Meta Platforms Inc. dropped 4.5 percent. Tesla Inc. fell 2.8 percent.
The Philadelphia Stock Exchange Semiconductor Index dropped 2.4 percent. Among notable names, Nvidia Corp. dropped 5.4 percent, Advanced Micro Devices lost 3.4 percent, Marvell shed 5.1 percent, and Micron Technology dropped 2.8 percent.
Jordan Klein, a managing director at Mizuho Securities, noted that the weakness in chipmakers is following a similar slump in software names.
“Could this be a sign of a much broader rotation out of tech altogether, with exposure to the best performing group in Tech during ’21 now being reduced?” he writes in a note. Semis, he added, “carry a high relative risk if this becomes a general rotation out of tech overall where low relative valuation does not help.”
The iShares Expanded Tech-Software Sector exchange-traded fund fell 3.2 percent on Monday. The ETF is down more than 20 percent from a November peak, touching its lowest since June.
Given the scale of the software weakness, some analysts are starting to see bargains in the group. Earlier, William Blair wrote that the rotation out of software “will be short-lived as the sector continues to benefit from strong secular growth trends.” Analyst Bhavan Suri is “confident the software industry will exhibit durable growth and that overall business fundamentals remain intact.”
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