ETFs tracking technology plunged last week on the back of disappointing earnings from bellwether firms Amazon and Google-parent Alphabet, whose drops helped push the Nasdaq further into a correction.
The Invesco QQQ Trust Series 1 (QQQ) tumbled as much as 4% earlier, but clawed back a chunk of the decline to post a loss of 1.6% Friday afternoon. It’s lost more than 9% this month. The Technology Select Sector SPDR Fund (XLK) and the Vanguard Information Technology ETF (VGT) slid around 3.4% in early trading before regaining much of the fall to trade around 1% lower.
“High multiple stocks are being punished as risk retreats globally and tech in general is spooked from trade wars,” said Dave Lutz, managing director of JonesTrading.
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Amazon posted third-quarter sales that fell short of estimates, its first back-to-back revenue miss in nearly four years. The company also gave disappointing revenue and profit forecasts for the upcoming holiday season. Meanwhile, Alphabet missed analysts’ expectations for third-quarter sales, and revenue growth for its main Google sites came in slower than the prior period.
Amazon, which was down 7% Friday afternoon, is the second-largest holding in QQQ. Alphabet, the fourth largest holding in the fund, fell as much as 5.6% earlier and was down 1.6% in afternoon trading.
“Tech sector sentiment has been weakening recently following a bullish first half of 2018,” said Todd Rosenbluth, director of ETF research at CFRA Research. “Alphabet’s results have dragged down the tech sector.”
