By Amrith Ramkumar
A decline in technology stocks moderated Monday and the shares
of several chip makers turned higher, alleviating some concerns
that last week's pullback could be the start of a deep rout.
Nvidia Corp., the S&P 500's worst performer on Friday,
Micron Technology Inc. and Texas Instruments Inc. were all up to
start the week. The makers of computer chips used in everything
from iPhones to self-driving cars have often led their larger
counterparts in the tech sector on the way up and down, leading
some investors to say the worst of the tech drop had passed. The
Dow industrials fell 36.30 points, or 0.17%, to 21235.67.
The S&P 500 technology sector fell 2.2% last week -- its
biggest weekly decline of the year -- as investors sold stocks that
have led gains in the broader market in 2017, including Apple Inc.,
Netflix Inc., Amazon.com Inc., Facebook Inc. and Google parent
Alphabet Inc. Some analysts and investors had grown concerned that
the concentrated group of highfliers was vulnerable to a
reversal.
The PHLX Semiconductor Index, a group of 30 semiconductor
stocks, declined 0.5% Monday compared with Friday's 4.2% slide,
which was its second-biggest daily drop of the year. Nvidia Corp.
climbed 37 cents, or 0.25%, to $149.97 on Monday after shedding
6.5% Friday in its highest-volume trading day since 2004, according
to FactSet.
"Is the panic over? To some extent, it feels like it is because
if you look at Nvidia, it's bounced back off the low," said Yousef
Abbasi, global market strategist at JonesTrading Institutional
Services, after the market closed Friday.
Nvidia, which more than doubled over the seven months through
Thursday, has been watched by some analysts and investors for signs
about where the broader tech rally is heading.
Some of the most actively traded options contracts on Nvidia
stock Monday were calls, or bullish options, expiring in June,
according to Trade Alert data.
"I think participants see this latest selloff as short-term in
nature," said Fred Ruffy, an analyst at Trade Alert, adding that
calls trading on Nvidia outpaced puts, or bearish options,
exchanging hands on Monday. "There are people using options to play
the stock for a rebound."
The PHLX Semiconductor Index has gained more than twice as much
as S&P 500 tech stocks and Nasdaq Composite since the start of
2016. Although a strong 2016 accounts for much of the PHLX Index's
gains, it has still fared better than the S&P tech sector and
Nasdaq this year.
As investors dialed back on some of the most popular stocks of
the year last week, some of this year's underperformers posted
gains.
Energy stocks in the S&P 500, the worst performer of the 11
sectors this year, have risen more than 3% during the two-session
tech selloff. The KBW Nasdaq Bank Index rose 4.9% last week -- its
biggest weekly gain of the year. That bounce has raised the
prospect that investors may rotate back into underperforming
sectors, boosting what had been laggards for much of the year.
At the same time, investors say those sectors face challenges of
their own. Bank stocks typically rise when long-term rates increase
relative to short-term ones, but that so-called spread has been
declining since the end of last year as investors reverse bets on
quicker economic growth. Shares of energy companies have fallen
largely because oil prices are down more than 14% this year.
That has made many analysts and investors wary of calling an end
to the tech rally.
"It's all a herd mentality," said Robert Pavlik, chief equity
strategist at Boston Private Wealth. "I think once you see this all
sort of play out, the market is going to be looking for growth," he
said, adding that he thinks investors will use the selloff as a
buying opportunity for tech.
Some say chip makers are one group that has more room to
run.
Many semiconductor companies have been benefiting from rising
memory-chip prices, according to a Benchmark Research industry note
published Monday. Global semiconductor revenue is forecast to
increase more than 12% this year, research firm Gartner said in
April.
The semiconductor index traded Friday at about 15.7 times Wall
Street's projected earnings for the next 12 months, according to
FactSet, below the Nasdaq's multiple of 22.5, suggesting that that
they are still attractively valued relative to the broader
market.
"At this point, in 2017, we see the group positioned mid-cycle,"
said Rick Schafer, managing director and senior analyst at
Oppenheimer. "It's always tough when you're in the middle of a
cycle to know whether you're in the third inning or the
seventh."
--Ben Eisen, Gunjan Banerji and Akane Otani contributed to this
article.
(END) Dow Jones Newswires
June 12, 2017 19:00 ET (23:00 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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