Tech Slide in Week of Upbeat Earnings Underscores Growing Unease

(Bloomberg) — Better earnings equals higher share prices, or so goes the customary thinking. For technology stocks during this reporting season, it’s the exact opposite.

Companies from Alphabet Inc. to Microsoft Corp. announced quarterly results that beat analyst estimates by a combined 7.7 percent, more than any other industry group in the S&P 500 Index. Yet their stocks posted the worst first-day reaction, falling an average 1.8 percent.

As tech megacaps from Facebook Inc. to Inc. and Google parent Alphabet reported earnings, the Nasdaq 100 Index ended a three-week streak of gains. The gauge finished the five-day period with a 0.2 percent loss and dropped 0.7 percent from a record-high Wednesday.

“Look at some of the businesses, whether it’s Apple or Google, their revenue and profit growth is staggering,” said Marshall Front, who manages $800 million at Front Barnett Associates in Chicago as chairman. “But over-concentration can lead to too much volatility on the downside.”

The S&P 500 slipped less than 0.1 percent over the five days. The Dow Jones Industrial Average gained 1.2 percent as robust results from Boeing Co., Verizon Communications Inc. and Caterpillar Inc. were rewarded with weekly share gains exceeding 7 percent.

The disconnect highlights the challenge for high-fliers such as Apple Inc. and Nvidia Corp. still due to announce results and poses a risk for a sector that has been whipsawed by price swings since June. Good profits aren’t proving to be enough for investors who have already held a record-high percentage of tech stocks in their portfolios.

Bank of America Corp. strategist Savita Subramanian flagged the potential for lackluster returns earlier this month, warning that the bar had been set higher for tech companies after investors crowded into stocks with the highest growth potential.

“Positioning risk may be an overhang to performance despite solid fundamentals,” she wrote in a July 7 research note.

And too much love can prove perilous when momentum reverses. In June, after investors had flocked to tech stocks anticipating faster earnings growth in a move that pushed the Nasdaq 100 Index to rise twice as fast as the S&P 500, they rushed for the exit all at once, sparking the worst selloff since 2008 relative to the rest of the market.

The vulnerability was on display again Thursday as tech stocks bore the brunt of a selloff triggered by a note from JPMorgan Chase & Co. quant strategist Marko Kolanovic that cautioned investors about the risks of record-low volatility in the equity market.

In another sign that folks are on edge, about $2.5 billion was pulled out of the largest exchange-traded fund tracking the Nasdaq 100 over the week, the most since 2007.

While tech stocks as a whole are trading at valuations similar to the broader market, anxiety is growing over prices for the industry’s leaders. The five biggest American companies by market capitalization, all involving Internet or software, have rallied an average of 32 percent since December, accounting for almost one third of the S&P 500’s advance in 2017.

The cohort, also known as FAAMG, fetched a price-to-earnings ratio of 62, almost triple the S&P 500. Apple, the largest, is due to announce results Tuesday and analysts predicted an 11 percent increase in profit.

“The earnings reports, however strong, don’t boost the sentiment toward tech stocks when valuations are this rich,” said Ilya Feygin, senior strategist at WallachBeth Capital. “There is scope for a pullback in the sector.”


the wider ramifications of the EgyptAir crashThe crash of EgyptAir flight 804 underscores the extended

The wider ramifications of the EgyptAir crash

dangers faced by means of the Egyptian traveller region. It also highlights the heightened securityworries over potential terrorist attacks in ecu airports.

within the early hours of may nineteenth EgyptAir flight 804 crashed in the japanese a part of the Mediterranean Sea about halfway among the Greek island of Kastellorizo and the Egyptian coast. The planeturned into flying among Paris Charles de Gaulle Airport and Cairo worldwide Airport and carried 66humans on board, all of whom are believed to be lifeless.

Investigations concerning the reasons of the crash are ongoing and thus far not one of the participatingauthorities issued any specific assertion concerning the precise cause of the incident. at the same time as searches for the black packing containers are underway more than one theories have surfaced. Speculations over a ability terrorist attack stay the most manageable and lift in addition worries over airtour protection. initial findings aid those allegations, indicating that the incident changed into potentiallybrought on by using an internal explosion at the level of the cockpit.

A terrorist assault on a flight from a ecu airport, much less than months after the lethal bombings in Brussels, ought to have a long wayaccomplishing implications. whilst no terrorist institution has butclaimed responsibility for the assault, the crash is probably to similarly weaken Egypt’s tourism region.then again, it raises extra questions over the safety of western eu airports.

EgyptAir the cutting-edge blow for Egypt’s tourism zone

Heightened terrorism fears is the closing thing Egypt’s tourism region needs. A critical department of thefinancial system, Egyptian tourism companies already suffered high losses in 2015. in line with datareleased through the BBC, the world money owed for approximately $50 billion or 15% of the nationalGDP.

the continued Sunni extremist insurgency within the Sinai Peninsula together with a string of terroristattacks in Cairo and violent unrest national have caused a prime lower in vacationer numbers. inside the2nd half of of 2015, the vacationer arrivals in Egypt fell by way of 50% and accommodations saw adecrease of greater than thirds in the variety of bookings.


a first-rate turning point for Egyptian tourism changed into the downing of Metrojet Flight 9268 in October 2015. The Islamic state Sinai department claimed obligation for the bombing and issued a statementclaiming that it were carried out by way of planting an explosive tool inside the plane. The attack left 224lifeless and raised primary questions concerning the nation of airport protection in Egypt, specially in theonce buzzing visitor hub of Sharm el-Sheikh.

The truth that EgyptAir flight 804 (a home service) crashed inside the eastern Mediterranean, underscores the specific will by using militants to target Egyptian property with the strategic reason to in additionweaken the united states’s economic system. at the same time as investigations remain ongoing, theseassertions will simplest remain hypotheses. but, the concern prompted with the aid of terroristorganizationsthreat to Egypt’s tourism zone is likely to preserve to result in tourists avoiding the u . s . a ..

Heightened expenses, delays for eu airports

since the bombing of Moscow’ Domodedovo airport in January 2011, eu protection officials haveincreasingly more been worried of ability attacks in opposition to major air transportation facilities. The March twenty second suicide assaults in Brussels came as a stark reminder of the Islamist terrorist riskfaced by airports in Europe.

should the continuing investigation finish that the EgyptAir flight 804 crash was resulting from a terroristattack, it would security measures at western european airports will come under intense scrutiny. Britishsafety offerings are already making plans to enforce a new protocol to defend London’s Heathrow airport.these new methods could consist of a “ring of metallic” perimeter with checkpoints and identity controlsmuch like the Israeli system installed area at Tel Aviv’s Ben Gurion airport.

furthermore, with less than weeks before the Euro 2016 UEFA championship, French safety services also are expected to boom the eye given to securing airports’ halls and get entry to to runways. further, it’s miles possibly that more suitable controls can be step by step put in region for aircraft landing in ecuairports and coming from quick layovers in 0.33 birthday party nations.

inside the foreseeable future, even supposing the EgyptAir flight 804 crash turned into due to a terroristattack, the incident is not likely to have a robust impact on the ecu traveler and air travel sectors.however, the cost of imposing new security features in addition to the potential associated traveldelays in main air transportation hubs might negatively have an effect on sales for organizations coping with main airports.