Big Tech Rebounds as Bulls See Buying Opportunity in Selloff
(Bloomberg) -- Major U.S. technology and internet stocks rallied on Tuesday after a selloff sent some of the shares into a correction and triggered a wave of bargain hunting.
Megacap tech stocks fueled a gain in the overall market, sending the Nasdaq 100 to its best gain in over a month. Netlifx Inc. led the charge, advancing 5.2% to a record high, while Facebook Inc. rose 2.1% in the aftermath of a global service outage on Monday and Senate testimony from a whistle-blower. Microsoft Corp., Alphabet Inc., Apple Inc. and Amazon.com Inc. all closed with gains of at least 1%.
The rally came after Monday’s pronounced slump helped send the Nasdaq 100 Index into oversold territory on concern a rise in Treasury yields may hurt the outlook for pricier high-growth names.
But on Tuesday, the buyers were back.
Megacap names look “very attractive” on the pullback and are all still showing very strong growth, said Justin Kelly, co-manager of the $15.2 billion MainStay Winslow Large Cap Growth Fund, which counts the Faamg names among its biggest holdings. In a phone interview, he singled out Microsoft and Alphabet as names that look particularly enticing.
The group’s growth narrative will be in focus in coming weeks, as companies report results for the third quarter. According to Bloomberg Intelligence, the S&P 500 Index is expected to report revenue growth of 14.6% in the quarter; all five Faamg names are expected to exceed that, with growth ranging from Amazon’s 16.5% rate to Alphabet’s 37.5%. Reports from all five are expected before the end of the month.
Such positive fundamentals have Anthony Saglimbene, who helps oversee more than $800 billion in assets as global market strategist at Ameriprise Financial, encouraging investors to add to positions.
“Right now expectations suggest very strong earnings and revenue growth for tech, and the group has strong profit margins. Fundamentals are very positive,” he said in a phone interview. “The yield issue might represent near-term risk, but over the longer term I think you’ll want to buy tech on weakness.”
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