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FAANG Stocks Are Getting Knocked Again

Ryan Vlastelica
FAANG Stocks Are Getting Knocked Again

(Bloomberg) -- The biggest stocks in the technology and the internet sectors resumed their descent Monday, the latest example of heavy volatility hitting the industries as a darker outlook for growth pushed investors to further step back from the one-time trading favorites.

The so-called FAANG stocks were among the biggest decliners of the day. Facebook Inc. fell as much as 5.9 percent to the lowest since February 2017, while Netflix Inc. shed 6 percent intraday. Amazon.com Inc. was off as much as 5.3 percent and Google-parent Alphabet Inc. dropped 3.9 percent.

These stocks, along with some high-profile chipmakers and other internet names, were among Wall Street’s top performers in the first half of 2018, with their high levels of growth spurring a frenzy of buying. But now, following an earnings season that failed to justify valuations seen as lofty, the momentum has turned to the downside.

“You had a lot of tech stocks pricing in no bad news, creating a risk where anything disappointing was going to make them come down. That’s exactly what happened. The fundamentals are now validating the decline,” said Andrew Slimmon, senior portfolio manager at Morgan Stanley Investment Management, who spoke to Bloomberg News in a phone interview.

Speaking about the momentum rally, Slimmon said simply, “It’s done. The bucket they were in has broken. I’m not expecting a 2000-style collapse, but I don’t see this as a good trade to go running back into.”

While many of these names remain strong performers for 2018 -- Netflix is up more than 40 percent year-to-date while Amazon has gained 30 percent -- they have seen pronounced weakness in recent weeks. All of the FAANG stocks are down more than 20 percent from record levels, putting them into bear-market territory.

Apple Inc., the largest stock in the market, fell as much as 4.1 percent Monday, on track for its sixth decline in the past eight sessions. The Dow component has come under heavy pressure on mounting concern for the future demand prospects of its iPhone lines. On Monday, the Wall Street Journal reported that Apple recently cut production orders for all three of the iPhone models that were unveiled in September.

Semiconductor stocks also extended their recent weakness. Nvidia Inc. tumbled as much as 10 percent, adding to Friday’s 19 percent slump in the aftermath of a weak outlook. The stock has shed almost half its value since early October.

Frank Davis, director of sales and trading at LEK Securities, speaking to Bloomberg about momentum stocks, said that the “pile-on mentality is gone, and the move out is brisk because the sentiment has changed so much.”

Among other chipmakers, Advanced Micro Devices Inc. fell 7.6 percent intraday while Micron Technology dropped as much as 6.6 percent. Micron was pressured after the Financial Times reported that Chinese authorities would deepen an antitrust probe into Micron and two other chipmakers, claiming “massive evidence” of violations.

Other so-called momentum names seeing sharp moves on Monday included Square Inc., which slid 10.4 percent, and Salesforce.com Inc., which lost as much as 8.7 percent. Both fell to their lowest levels in several months.

Dropbox Inc. fell as much as 8.4 percent to a record low, Spotify Inc. dropped as much as 6.3 percent, Roku Inc. was down as much as 5.5 percent and Twilio Inc. lost more than 14 percent.

(Adds analyst comment in fourth paragraph, updates prices.)

To contact the reporter on this story: Ryan Vlastelica in New York at rvlastelica1@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Scott Schnipper

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