Google was not the only mega-cap tech company to slide last week. Amazon shares suffered their biggest one-day fall since February. Shares in Facebook parent Meta suffered a double-digit percentage decline, even though the company announced better-than-expected earnings.
Tesla shares, too, have also come under pressure, with the electric car giant losing 15 per cent of its value since its recent disappointing earnings report. Weakness among mega-cap tech shares is a problem, because indices have become overly reliant on them.
Warnings that indices were being propped up by the magnificent seven stocks – Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla, and Meta – have lately grown louder. In aggregate, the seven companies had been expected to post a 33 per cent gain in earnings in 2023, compared to a slight decline for the rest of the S&P 500. The same seven stocks have been responsible for almost all of the S&P 500′s gains in 2023.
Quite simply, market breath stinks right now. Last week, just 28 per cent of S&P 500 stocks were trading above their 200-day moving average, a noticeably lower number than that seen during last spring’s market retreat. As James Bianco of Bianco Research puts it, both the “S&P 493″ and the “Russell 2993″ haven’t gained at all this year. Mega-cap strength for most of 2023 has masked widespread weakness, so the reversal in tech stock fortunes was bound to hurt indices.
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“A market held up by a handful of stocks”, cautions Warren Pies of 3 Fourteen Research, “is inherently less stable than one with broad participation.”
