This post was originally published on this site
The so-called Magnificent Seven grouping of technology stocks is looking less magnificent lately, as Meta Platforms Inc. teeters toward joining several of its peers in correction territory.
Three of the Big Tech giants — Apple Inc.
AAPL,
Microsoft Corp.
MSFT,
and Nvidia Corp.
NVDA,
— are already in correction, meaning their shares have fallen at least 10% from their recent peaks. And Tesla Inc.’s stock
TSLA,
is in a bear market, meaning that its stock is down more than 20% from its recent high.
Read: Have AI stocks like Nvidia reached bubble territory? Here’s what history can tell us.
Only Amazon.com Inc.
AMZN,
Alphabet Inc.
GOOG,
GOOGL,
and Meta shares
META,
are in bull-market territory, though Meta is on track to close out Thursday in correction. Shares of the Facebook parent company recently changed hands at $288.80 and would enter correction with any finish below $292.93, according to Dow Jones Market Data.
See also: U.S. stocks pare losses as rising bond yields weigh on ‘Magnificent 7’ stocks
The retreat in Meta shares looks like “somewhat of a mean reversion” given their strong run this year, according to Matt Stucky, senior portfolio manager for equities at Northwestern Mutual Wealth Management.
Even with recent declines, Meta’s stock is the second best performer in the S&P 500
SPX
so far this year, up 142% during 2023.
“When the overall market pulls back, you start to see some of the winners mean-revert more aggressively,” Stucky told MarketWatch.
Apple entered correction Wednesday upon falling more than 10% from its Jul. 31 peak of $196.45. The company sells more discretionary products at a time when “consumers are still being pinched” and thinking more carefully about where they spend their money.
Don’t miss: Walmart customers’ household budgets still under pressure, CEO says
Additionally, the company does about 20% of its business in China, where recent economic signals have been concerning, he added.
| Stock | Correction status | Details |
| Alphabet | Bull market | Would need to close below $119.45 to enter correction |
| Amazon | Bull market | Would need to close below $128.00 to enter correction |
| Apple | Correction | Entered correction Wednesday when it fell from its Jul. 31 peak of $196.45. It will enter a bear market at $157.16. |
| Meta Platforms | On track for correction | Would enter correction at any close lower than $292.93 |
| Microsoft | Correction | Entered correction Aug. 9 when it fell from its Jul. 18 peak of $359.49. Will enter bear market at $287.59. |
| Nvidia | Correction | Entered correction Aug. 9 when it fell from its Jul. 18 peak of $474.94. Will enter a bear market at $379.95. |
| Tesla | Bear market | Entered a new bear market on Aug. 15 |
The Magnificent Seven had been beneficiaries of three key investment trends for most of 2023, according to Stucky, as the market was upbeat about easing inflation, an end to interest-rate hikes and the potential for artificial intelligence.
Investors who became less worried “about the Fed continuing to hike rates into oblivion” wanted quality companies that were growing, protecting margins and delivering good shareholder returns, even if their stocks carried richer multiples, Stucky said. However, it’s a “normal function of markets to ebb and flow” when sentiment is elevated, as it was in July.
The declines in Big Tech names mirror weakness in the sector more broadly after a sharp run up to start the year. As of late July, the Nasdaq-100
NDX
was trading 26% above its 200-day moving average — “a statistical extreme,” according to CFRA Chief Investment Strategist Sam Stovall.
Tech stocks were “like an army that had gotten well ahead of its supply lines,” he told MarketWatch. In that scenario, an army “has to either retreat or let supplies catch up.”
The current quarter is the most challenging one of the year, Stovall said, and August is one of the most challenging months. Plus, Wall Street is uneasy as it waits to see what the Federal Reserve will do with interest rates.
“There’s so much uncertainty as it relates to interest rates with yields on the 10-year note continually climbing,” Stovall said. “Investors are saying it’s time to take profits, and the greatest profits were seen in tech.”
There could be more room to fall for tech stocks on the whole, according to Stovall. While the S&P 500 may not drop 10% from its recent peak, the Nasdaq could see a “fairly mild correction” as this period of seasonal weakness continues through the end of September.
Still, he sees some encouraging signs in a hawkish-leaning Fed, which could raise rates in September but make that hike the last for this cycle.
“That would set us up quite nicely for a typically favorable fourth quarter,” Stovall said.
