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

Refunds for $10,200 Unemployment Tax Break to Begin This Month
Coronavirus and Your Money

Refunds for $10,200 Unemployment Tax Break to Begin This Month

The IRS will start issuing automatic refunds sometime in May to people eligible for the unemployment benefit tax exemption.
May 1, 2021
Child Tax Credit 2021: Who Gets $3,600? Will I Get Monthly Payments? And Other FAQs
Coronavirus and Your Money

Child Tax Credit 2021: Who Gets $3,600? Will I Get Monthly Payments? And Other FAQs

People have lots of questions about the new $3,000 or $3,600 child tax credit and the advance payments that the IRS will send to most families in 2021…
May 4, 2021
10 Dividend Growth Stocks You Can Count On
dividend stocks

10 Dividend Growth Stocks You Can Count On

What should investors prioritize in dividend growth stocks? A history of aggressive payout expansion, and the ability to generate enough cash to keep …
May 3, 2021

Recommended

Stock Market Today 5/5/21: Dow Ekes Out Record, Nasdaq Retreats Again
Stock Market Today

Stock Market Today 5/5/21: Dow Ekes Out Record, Nasdaq Retreats Again

Energy and materials stocks led the way Wednesday as good (albeit not great) economic data was enough to push the Dow to new highs.
May 5, 2021
Stock Market Today 5/4/21: Rate Fears Send Tech Tumbling
Stock Market Today

Stock Market Today 5/4/21: Rate Fears Send Tech Tumbling

Treasury Secretary Janet Yellen put a little fear of future Fed rate hikes into investors, sparking an exodus Tuesday in the FAANGs and other tech nam…
May 4, 2021
Stock Market Today 5/3/21: Dow Leads in a Mixed May Start for Stocks
Stock Market Today

Stock Market Today 5/3/21: Dow Leads in a Mixed May Start for Stocks

The "rotation trade" popped its head back up Monday, as the Dow advanced and the Nasdaq slipped to start the new month.
May 3, 2021
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 2, 2021