Nasdaq and the high flying US tech sector took a couple of worrying hits last week that was overshadowed by the expanding COVID-19 case number story here and offshore.
The shares of two of the market leaders – Amazon and Netflix took surprising hits last week which could be a sign of worse to come if the current second-quarter reporting season is weak, and forecasts for the rest of the year and 2021 unconvincing.
Shares of Amazon closed 1.3% lower on Friday, and were off 7.4% for the week, the worst week for the stock since February 28.
Shares of Netflix Inc. fell 6.5%, thanks to concerns over weak growth projections for the six months to the end of the year which overshadowed a solid jump in revenue and the addition of more than 10 million new subscribers in the June quarter.
Netflix shares fell more than 10% last week in one of its biggest falls of the year, trimming the year to date gain to 52% from 63%.
There will be a further test this week with Microsoft due to release its quarterly figures this week, along with Intel, the chip giant.
Nasdaq dropped 1.1% last week while the S&P 500 index was up 1.2% and narrower Dow rose 2.3% for the week.
US analysts point out that Nasdaq’s weakness last week started.
On Monday, the Nasdaq 100, comprising the 100 biggest stocks on the exchange, was up more than 2% before finishing the day down more than 2%.
Barrons magazine says “That doesn’t happen too often. In fact, there have been just nine other times when the index has gained more than 1%, only to finish the day down more than 1%.”
“Three months later, the Nasdaq 100 was lower 60% of the time, with an average loss of 4.4%, according to Sundial Capital Research.
“The only time the Nasdaq 100 gained more than 2% to hit a new high, only to finish the day down more than 2%? That was on March 7, 2007,” Barrons said.
Good results from Microsoft this week and Apple and Amazon the week after could very well paper over this crack, but the increasingly sluggish US economy and the rising toll of COVID-10 cases is increasingly worrying for the wider market, not just tech stocks.
