Tech stars see shares dim in eyes of investors

Technology companies that catapulted Wall Street to glorious heights have seen shares tumble on investor concerns that the days of stellar profits are waning.

Since their most recent peaks, Amazon lost 18.5 percent, Apple 17 percent, Netflix 23 percent, and Google-parent Alphabet 14 percent.

And the tumble came after Amazon was briefly valued, based on share price, at more than a trillion dollars, and as the e-commerce colossus heads into what should be a money-making year-end holiday shopping season.

The mood worsened early this month for Apple after it released a disappointing sales forecast for the final quarter of this year.

Investors anticipating fewer iPhones as holiday gifts knocked Apple off its pedestal as a rarity with a trillion-dollar market valuation.

Analysts contended that US tech titans driving Wall Street trends fell because conditions drove them stunningly high, and circumstances change along with company fortunes.

“Investors have really piled into the tech sector since the Brexit,” said Nasdaq analyst Jack Menke.

He recalled the sector climbing an average of seven percent in the nine quarters following the British vote because, faced with uncertainties in Europe, investors were drawn to the potential of high returns on US tech companies in a low-interest environment.

 

Technology companies that catapulted Wall Street to glorious heights have seen shares tumble on investor concerns that the days of stellar profits are waning.

Since their most recent peaks, Amazon lost 18.5 percent, Apple 17 percent, Netflix 23 percent, and Google-parent Alphabet 14 percent.

And the tumble came after Amazon was briefly valued, based on share price, at more than a trillion dollars, and as the e-commerce colossus heads into what should be a money-making year-end holiday shopping season.

The mood worsened early this month for Apple after it released a disappointing sales forecast for the final quarter of this year.

Investors anticipating fewer iPhones as holiday gifts knocked Apple off its pedestal as a rarity with a trillion-dollar market valuation.

Analysts contended that US tech titans driving Wall Street trends fell because conditions drove them stunningly high, and circumstances change along with company fortunes.

“Investors have really piled into the tech sector since the Brexit,” said Nasdaq analyst Jack Menke.

He recalled the sector climbing an average of seven percent in the nine quarters following the British vote because, faced with uncertainties in Europe, investors were drawn to the potential of high returns on US tech companies in a low-interest environment.

Tax cut boost

US President Donald Trump’s tax reform passed late last year set the stage for tech companies to reap windfalls in the first two quarters of 2018, driven by tax savings that paved the way for big spending on buying back shares or paying out dividends.

“We are facing a natural correction,” Menke said of the share price drops of leading tech companies in recent weeks.

Essentially, after rocketing due to an alignment of economic planets, it is time for tech shares to return to earth.

The US Federal Reserve central banking system is firmly committed to interest rate hikes that increase borrowing costs for households and businesses, potentially leading to lower demand as people either borrow less or spend more to pay for the debt.

The rise in US interest rates has also helped increase the value of the dollar, which companies translate into a “headwind” making their products more expensive abroad.

Meanwhile, US economic growth that remains strong might slow, which could contribute to a global recession. This was illustrated in October by China reporting its weakest quarterly growth in nine years.

From chatting on iPhones to shopping at Amazon and binge-watching on Netflix, these technologies are woven into daily lives of billions of people, tying the fortunes of companies to rises or falls of local economies around the world.

Between Trump’s trade war and the decline in global economic prospects, investors see “higher risks of a recession compared to the last 12 months,” according to Manulife AM senior portfolio manager Nate Thooft.

 
 
 
 
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