Advertisement
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."

Advertisement - Article continues below

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.

Advertisement - Article continues below
Advertisement
Advertisement - Article continues below

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. 
Advertisement
Advertisement

Most Popular

What Trump's Payroll Tax Cut Will Mean for You
Tax Breaks

What Trump's Payroll Tax Cut Will Mean for You

President Trump issued an executive order to suspend the collection of Social Security payroll taxes. How much will it save you?
August 10, 2020
7 Surprisingly Valuable Assets for a Happy Retirement
happy retirement

7 Surprisingly Valuable Assets for a Happy Retirement

If you want a long and fulfilling retirement, you need more than money. Here are the most valuable retirement assets to have (besides money), and how …
August 3, 2020
How a Second Stimulus Check Could Differ from Your First One
Tax Breaks

How a Second Stimulus Check Could Differ from Your First One

The HEROES Act, which the House passed in May, would authorize another round of stimulus checks. While the new payments would be similar to the first …
August 11, 2020

Recommended

Stock Market Today 8/11/20: Banks, Industrials Hold Up Against Downdraft
Markets

Stock Market Today 8/11/20: Banks, Industrials Hold Up Against Downdraft

A lack of movement on stimulus and little else to encourage Wall Street resulted in a broad down day Tuesday, but the recent market rotation continued…
August 11, 2020
Stock Market Today 8/10/20: The Dow Heats Up as Tech Tones It Down
Markets

Stock Market Today 8/10/20: The Dow Heats Up as Tech Tones It Down

A rotation from red-hot Big Tech into more battered cyclical sectors fueled a big gain for the Dow on Monday.
August 10, 2020
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.
August 9, 2020
Stock Market Today 8/7/20: Strong July Jobs Report Has a Dark Side
Markets

Stock Market Today 8/7/20: Strong July Jobs Report Has a Dark Side

A better-than-expected employment report that saw 1.8 million U.S. jobs added in July didn't give the markets much of a boost Friday.
August 7, 2020