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Big Tech Bites the Dust

They say a picture is worth 1,000 words.

But I’m only charging about 100 Nasdaq points for this image:

FANG

We’ll get to yesterday’s carnage in just a minute. First, let’s check in on some buyout news that was supposed to magically boost tech stocks heading into the new trading week.

The tech sector was treated to some positive news on Monday when International Business Machines (NYSE:IBM) agreed to cough up $34 billion for cloud computing mainstay Red Hat Inc. (NYSE:RHT).

That adds up to $190 per share for Red Hat — an incredible premium of 60% from Friday’s close.

That’s quite the windfall for Red Hat shareholders. But IBM bulls weren’t as lucky. The stock dropped more than 4% on Monday, building on IBM’s post-earnings collapse that’s resulted in a drawdown of 20% this month.

IBM

The Red Hat buyout briefly ginned up some positive speculation regarding takeover targets in the cloud computing space. Some media outlets even reported how tech shares were “surging” on the news early Monday morning.

Let’s not get ahead of ourselves, people!

In reality, the IBM deal didn’t do much to help prop up the ailing tech sector.

The Nasdaq Composite’s early morning gains vanished before lunch as the tech-heavy index dragged down the averages. It finished lower by more than 1.6%. Meanwhile, the Dow lost 245 points on the day.

Much of yesterday’s Nasdaq rot comes courtesy of the once-powerful FANGs. Amazon led the way lower with a drop of more than 6% as the stock extends its post-earnings swoon. You might have even noticed that Amazon was the last of the FANGs treading water above its 200-day moving average.

Not anymore.

AMZN

After two days of waterfall action, Amazon joins Netflix as the group’s biggest losers. Both are down more than 20% this month.

It’s safe to say that the Silicon Valley darlings have lost their untouchable status. Between the big earnings misses from Amazon to Alphabet and relentless profit taking, it’s hard to imagine how these former market leaders could simply shake off this month’s disastrous action and zip back to new highs.

As Big Tech suffers, the growth vs. value debate goes mainstream.

When the rising tide was lifting all tech stocks, no one cared about pesky valuations. But after this month’s swift correction, every analyst and pundit on Wall Street is talking about a potential return to value investing.

Forget about sexy stories — maybe it’s time for quality stocks trading at a steep discount to enjoy some time in the spotlight.

“If the long run of dominance is indeed over for growth stocks, the stakes could be huge,” the Associated Press reports. “It would mean pain for investors who went all-in on the sexy, high-flying stocks that so dominated cocktail-party conversations.”

Tech stocks aren’t the only high-growth names hitting the skids.

Pot stocks are getting clobbered again. Cannabis stocks are losing momentum following their worst week in nine months, MarketWatch notes.

Legal weed plays held up well during the early stages of the correction. But many of these stocks are now getting dragged down with the rest of the market. Tilray Inc. (NASDAQ:TLRY) and newly-listed Aurora Cannabis (NYSE:ACB) dropped more than 16% on Monday.

But the drama ain’t over yet…

With Election Day approaching, four more states are now ready to vote on marijuana.

What will the vote results tell us about the marijuana markets? Which pot stocks could shoot up the most starting Wednesday after the ballots are counted?

Click here now to sign up for our one night only live internet broadcast to find out…

Sincerely,

Greg Guenthner

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Greg Guenthner

Greg Guenthner, CMT, is the editor of Opening Bell Fortunes and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing since 2005. In 2019, the average position in Greg’s Sunrise Fortunes portfolio outperformed the S&P 500 by 1.65x.

View More By Greg Guenthner