Nasdaq 100 Rebounds to Snap Rout Even With Big Tech Divided
(Bloomberg) -- Shares of technology and internet stocks staged a comeback on Monday, with the Nasdaq 100 Index closing up 0.1% after dropping as much as 2.7% earlier as investors continue to monitor rising Treasury yields.
Megacap tech names were mixed, while semiconductor and software stocks rose after erasing earlier losses. The move comes as some investors consider whether it’s time to start buying the dip in U.S. equities. Monday’s gain snaps a four-session streak of declines for the tech-heavy Nasdaq 100, though the S&P 500 Index still closed lower.
Among big tech stocks, Amazon.com Inc. fell 0.7% to end the session at the lowest level in three months. The stock has dropped about 13% from a November peak and is on a five-session losing streak.
Not everyone is bearing on Amazon, however. 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.”
Meta Platforms Inc. also dropped, slumping 1.1%, and Apple Inc. closed little changed. Meanwhile, Alphabet Inc. gained 1.2%. and Microsoft Corp. inched up 0.1%.
The Philadelphia Stock Exchange Semiconductor Index added 0.2%. Intel Corp. led the advance, followed by Texas Instruments Inc. The index is down 3.6% so far in 2022.
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 wrote 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 (ticker IGV) rose 0.9%, the most in two weeks. The ETF remains down 19% from a November peak.
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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