Markets

Stock Market Today: Tech Stocks Take a Tumble

An increase in weekly jobless benefits applications and profit-taking in tech stocks sent the major indices to steep declines Thursday.

The corporate earnings calendar provided plenty of reasons for positivity Thursday, but Wall Street wasn't having it, as slight early declines snowballed into a sizable single-day dip.

Microsoft (MSFT, -4.4%) tumbled despite cruising past quarterly expectations, including revenues that jumped 13% year-over-year against the COVID-19 grain.

"MSFT delivered a solid print," writes Stifel analyst Brad R. Reback (Buy, $220.00 price target), "with better-than-expected top-line and bottom-line results as Work/Learn/Play from home dynamics (Gaming, Surface, Windows) more than offset SMB transactional headwinds in Office and Server."

Other positive results came from Cottonelle parent Kimberly-Clark (KMB, +2.2%), which neared new highs after blowout Q2 results and the reinstatement of share buybacks, and Tesla (TSLA, -5.0%), which produced a fourth straight quarterly profit.

But weekly unemployment claims turned higher for the first time since March; a more-than-expected 1.42 million Americans filed for jobless benefits for the week ended July 18. Moreover, the GOP was still struggling later Thursday to agree to various components of a $1 trillion stimulus proposal, though it's expected to include another round of $1,200 checks.

Small-cap stocks weathered Thursday's headwinds well, finishing flat at 1,490. The Dow Jones Industrial Average closed 1.3% lower to 26,652 and the S&P 500 fell 1.2% to 3,235. But selloffs in technology's biggest names weighed heaviest on the Nasdaq Composite, which declined 2.3% to 10,461.

Tech Is a Long-Term Investment, Too

The "Big Five" giveth, and they also taketh away.

Technology giants Microsoft, Apple (AAPL, -4.6%), Amazon.com (AMZN, -3.7%), Alphabet (GOOGL, -3.1%) and Facebook (FB, -3.0%) represent roughly 22% of the S&P 500 because of their size. That has been advantageous so far, as their collective 34% total return through yesterday is what's been keeping the index marginally positive. However, when they have a down day like today, you'll feel it.

And at least for now, try to resist worries that near-term weakness in large-cap tech will herald in a 2000-esque bubble pop.

"While many fear the current environment is like 2000 'dot com' bubble, the macro backdrop suggests otherwise," Canaccord Genuity equity strategist Tony Dywer writes in a Thursday note to clients. Instead, he says, "We believe the combination of incredible monetary and fiscal stimulus, historic excess liquidity, a synchronized global economic recovery, and significant underperformance of the economically sensitive areas set the stage for a long-term rotation into the Industrial, Financial, Materials, and Consumer sectors."

While a change in leadership still wouldn't be good for the aforementioned mega-cap names, just remember: Patience is a virtue – even in tech stocks.

Relatively short-term bouts of volatility shouldn't shake your from buy-and-hold strategy as long as you still believe your picks will continue to benefit from long-term trends, be it in e-commerce, work-from-home, even electric vehicles.

The same goes for artificial intelligence stocks, where the developing technology of "smart" machines is expected to deliver explosive growth throughout this whole decade. But if AI stocks seem a little too unstable for you, consider riding the entire trend higher via diversified baskets of the industry's leading players. Here, we highlight five AI ETFs that let investors leverage this next great technological frontier.

Kyle Woodley was long AMZN, FB and MSFT as of this writing. 

Most Popular

Education is Key: 3 Financial Lessons for Retirees Nearing Retirement
retirement planning

Education is Key: 3 Financial Lessons for Retirees Nearing Retirement

When it comes to retirement planning, educating yourself can keep you from making big mistakes. Here are three key lessons that everyone preparing for…
May 24, 2022
Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
Why Are Gas Prices Still Going Up?
spending

Why Are Gas Prices Still Going Up?

The cost of a gallon of gas is heading back toward its March highs. What’s driving the resurgence, and will gas prices go down anytime soon?
May 23, 2022

Recommended

Kiplinger's Weekly Earnings Calendar
stocks

Kiplinger's Weekly Earnings Calendar

Check out our earnings calendar for the upcoming week, as well as our previews of the more noteworthy reports.
May 27, 2022
Is the Stock Market Closed on Memorial Day 2022?
Markets

Is the Stock Market Closed on Memorial Day 2022?

The stock market gets a full day off for Memorial Day. The bond market gets Monday off too, not to mention an early close ahead of the holiday weekend…
May 27, 2022
Amazon Stock Split Puts It in Play to Join the Dow
stocks

Amazon Stock Split Puts It in Play to Join the Dow

Amazon.com’s four-digit price tag is coming down as the e-tailer preps for a 20-for-1 AMZN stock split effective in June.
May 27, 2022
Stock Market Today (5/26/22): Retail Roars Back, Markets Build Positive Momo
Stock Market Today

Stock Market Today (5/26/22): Retail Roars Back, Markets Build Positive Momo

Discount retailers Dollar General (DG) and Dollar Tree (DLTR) were at the forefront of a second straight session of broad market gains.
May 26, 2022