began the second week of May looking like the stock would extend a six-week loss streak, the longest since before the pandemic.
Over the past six weeks, Apple (ticker:
) and Amazon
) lost more than 10% and 30%, respectively, in the midst of widespread market sales, which hit the technology sector particularly hard as the Federal Reserve raises interest rates in an attempt to curb inflation. Apple fell 3.3% on Monday, while Amazon fell 5.2%.
“The size and speed of technology name sales came as a surprise this year as fears of a recession and no more easy money on the Fed caused multiple to fall off the cliff in technology stocks with so much pain inflicted by bulls,” Wedbusha analyst Daniel Ives wrote in a note on research.
The last time Apple faced such a persistent losing streak was during the eight weeks that ended on November 23, 2018, when it lost 22.5%. For Amazon, a series of six-week losses was broken on August 23, 2019, when it fell 13% in that time period.
Back in 2018, Apple fell on concerns about falling behind consumer demand for the iPhone XR, as well as on weaker-than-expected guidelines for the 2018 holiday season. Federal Reserves also played a role as President Jerome Powell spoke of continued rate increases. Today, apart from the Fed hawk, the company is in second place. The tech giant recently delivered an impressive earnings report, surpassing all expectations, increasing its dividends and expanding its share repurchase program.
Stocks remain a favorite among analysts – one of Ives’ best choices – although management has warned that supply chain challenges, including the Covid-19 blockade in China, make it difficult to meet demand in the short term. But that concern was enough to sow suspicion among investors.
“If what Apple sees as broadly grounded, a shortage of inventory could eventually turn into indecision in spending, hampering the positive momentum we see on the demand front,” wrote Deutsche Bank analyst Benjamin Black. Deutsche Bank has a rating of Buy on Apple.
The Amazon sale, while also undesirable, might be easier to understand. The company’s online retail and advertising sales in the first quarter missed estimates, and guidelines for the second quarter were similarly worse. The conditions are no different from those that spurred the fall of stocks in 2019, which coincided with mild earnings in the second quarter and concerns over growing tensions between the US and China.
To be honest, it’s not just Apple and Amazon – technologically difficult
it has fallen more than 15% in the last six weeks, making it the worst performance in the six weeks since April 2020. Google Parent Shares
), for example, fell 18.3% in the last six weeks due to its worst performance since April 2020.
) fell by 9.5% over the same period.
Unfortunately, there may be more pain in the technology sector, said Joe Quinlan, head of the CIO’s market strategy for Merrill and Bank of America Private Bank. The pandemic has pulled much of the earnings growth for these companies, he said, while rising interest rates have prompted investors to move away from growth stocks and find refuge 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 dipping your finger into technology.”
Ives of Wedbush agreed, saying he remains “persistent” through the market storm, favoring companies that rely on software, semiconductors, cybersecurity and product-driven cycles such as Apple. Amazon, Microsoft and Google, in turn, could benefit from switching to cloud services, he added.
Write to Sabrina Escobar at [email protected]