FAANG FEELS FACEBOOK FALLOUT

The rush to get out of U.S. tech stocks entered its third day Monday as concerns mounted over how the storied FAANG bloc (Facebook Inc., Amazon.com Inc., Apple Inc., Netflix Inc. and Alphabet Inc.’s Google) will fare amid rising interest rates and slower growth.

All of the FAANGS retreated, with Facebook sinking 3.3 per cent and Netflix falling as much as 5.3 per cent. The FAANG index retreated 2.5 per cent, widening its three-day loss to nine per cent. This compares with a 1.4-per-cent loss for the S & P 500 over the same time.

Investors have been bailing from the space since the Facebook’s earnings hit July 25, prompting the biggest market-cap decline in U.S. history. Market darlings since the 2016 presidential election, the group of tech megacaps has seen investors heading for exits with the advance seen as having gone too far, too fast.

“Sentiment is turning sour in FAANG, especially after earnings,” Michael Antonelli at Robert W. Baird & Co. said. “They are dragging the Nasdaq 100 down by its feet.”

The sell-off has widened losses in the S & P 500 Information Technology Index to 5.2 per cent, the biggest threeday retreat since March. The rout erased US$240 billion from the market capitalization of the S & P 500 Information Technology Index to US$6.3 trillion, from US$6.6 trillion before Facebook reported a miss on user growth.

Sentiment on the tech megacaps has soured since Wednesday, when Facebook reported disappointing second-quarter user growth that knocked the stock down 19 per cent. To Bank of America’s Michael Hartnett, a rout in Facebook signalled a peak in tech megacaps, prompting him to recommend clients short the FAANG block.

Support is wearing thin for technology firms. The S & P 500 Information Technology Index fell below its 50-day moving average on Monday, while the Nasdaq composite and the Nasdaq 100 hover near that level. Investors last week pulled US$1.4 billion from the largest ETF tracking the Nasdaq 100.