S&P 500 Becomes More Exxon, Less Amazon

Even so, the Nasdaq is still down 28% this year, while the S&P 500 has lost 16%. And not everyone is convinced last week’s tech rebound will last.

Strategists at Ned Davis Research raised their exposure to value stocks on Thursday, saying an eventual Fed pivot could deliver more gains to sectors closely tied to the economy. Bank of America Corp. strategists said they expect the biggest tech companies to underperform over the next few years due to continuing cost pressures.

Apple, Microsoft, Alphabet, Amazon and Meta Platforms have been responsible for about half of the S&P 500 Index’s drop this year, according to data compiled by Bloomberg. If all the companies in the benchmark are weighted equally — instead of by market value, which is how the index is actually constructed — its drop would have been cut by six percentage points this year.

While investors are optimistic that interest rate increases will end next year, some big tech companies are bracing for the impact of an economic slowdown.

Amazon has warned of a weak holiday shopping season ahead. Last week, Facebook’s parent, Meta Platforms, said it would cut more than 11,000 jobs, the first major round of layoffs in the company’s history as it seeks to reduce costs amid a slowdown in digital advertising. Microsoft has also cut jobs, while Amazon, Alphabet and Apple have all slowed or paused hiring.

“Big technology stocks in particular have benefited from the almost endless liquidity and cheap money financed by the immense pace of growth,” said Dirk Friczewsky, market analyst for ActivTrades. “Now a different wind is blowing on the financial markets and investors don’t want to suddenly be without a chair when the music stops playing.”

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