Tech stocks' long drag looks set to go on
SAN FRANCISCO (MarketWatch) -- What started out as a bang-up year for the tech sector has in recent weeks taken a turn for the worse, and there appear to be few signs that conditions will improve as the summer months approach.
While June is only one day old, there is evidence that some big-name tech companies are going to feel the heat and stay in the doldrums. On Friday,
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Such declines, coming along with Friday's highly disappointing jobs data, only added more woes to an ongoing negative sentiment toward the market in general, and the tech sector in particular. Read more about the lastest job figures and unemployment rate.
In May alone,
"Tech has been hit more because it had been doing better," said Keith Springer, president of Springer Financial Advisors, a Sacramento, Calif.-based money management and advisory firm. "Everyone's getting hit, but tech companies are getting hit bad because they are paying workers to produce goods and services when we don't need them to produce more things right now."
The losses in May, which have already dragged into June, were across the board. The tech-heavy Nasdaq Composite (COMP) has fallen almost 10% since May 1, while the Philadelphia Semiconductor Index (SOX) and the Morgan Stanley High Tech 35 Index (MSH) are both down more than 14% over the same period.
That decline, while enough to scare off many investors, looks even worse when compared to how well the market did during the first quarter of the year. Between January and the end of March, the Nasdaq scored a gain of 18% and also rose above the 3,000-point mark for the first time in more than a decade. The Philadelphia Semiconductor Index rose 20% during the quarter and the Morgan Stanley High Tech 35 Index ended the first quarter with more than a 21% gain.
The retreat can also be seen in how earnings estimates overall fell for the tech sector over the last month. According to data from FactSet Research, between May 1 and June 1, the aggregate dollar-level earnings estimates for tech companies listed on the S&P 500 Index (SPX) fell almost 1%, making it the fourth-highest decline for the S&P 500. Earnings estimates for financial stocks were down 4.6%, energy stocks pared back by 2.4% and consumer discretionary stocks are off by 1.6% and the overall S&P 500 earnings estimates are down 1.5% over the same period.