Biggest QQQ Exodus Since 2000 Ups the Ante on Big Tech Earnings

(Bloomberg) -- Tech’s uninspired start to earnings season has investors dumping billions before the sector’s heavyweights report next week.

The $161 billion Invesco QQQ Trust Series 1 exchange-traded fund (ticker QQQ) has bled nearly $6 billion over the past five days in its worst stretch since the dot-com era of 2000, according to data compiled by Bloomberg. Tech has suffered this week after stay-at-home stalwart Netflix Inc. reported disappointing subscriber growth in the first quarter, helping drag QQQ to its first weekly drop in over a month.

After Netflix’s disastrous opening volley, the pressure is on the rest of the Faang block of megacap tech stocks to deliver, including Amazon.com Inc., Apple Inc. and Microsoft Corp., which are scheduled to release earnings next week. While the few tech companies that have already reported have surprised on earnings by 18% on average, their stock prices have barely moved in the following 24 hours, data compiled by Bloomberg show.

“With earning season starting to heat up, especially for the tech sector next week, it is likely that the expectations for technology companies may be too high,” said James Pillow, managing director at Moors & Cabot Inc. “It’s early still, but just look where the earnings surprises are coming from: materials, energy, and financials, all about 80% or higher. Money will follow performance -- and the performance is coming from those sectors.”

ETF flows reflect the shift. Financials-tracking ETFs have attracted $15.7 billion in inflows so far in 2021, while energy and materials funds have absorbed $14.4 billion and $4.9 billion, respectively. Meanwhile, tech ETFs have posted inflows of just $3.9 billion year-to-date, after QQQ alone took in $16.7 billion in 2020 -- the most since 2000.

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