MegaCap Tech Stocks Take a Big Hit-Volatility Rising in a Sector Shift

Market Rotation Supports Overall Market-S&P 500 Stable today up 17% YTD

Sluggish Biotech Now Just a Market Performer With IBB up 17% YTD

The booming tech sector sold off today with the XLK down over 2%. Harder hit were the 2017 high fliers such as the FAANG stocks: FB, AAPL, AMZN, NFLX and GOOG all down over 3%. Undoubtedly some big funds and robots were taking profits and an imbalance of trades roiled the market in the early am. The red-hot semiconductor sector also took a big hit with the Van Eck Vector ETF (SMH) down over 4%, but it is up over 40% YTD. Nvidia (NVDA) is down 6.78% today but up 84% YTD! Nasdaq was down 1.4%. Today’s divergence could be signaling a major sector shift into laggard sectors or capital-intensive companies more sensitive to tax cuts and the Trump legislative agenda.

Then there is the Bitcoin sideshow with a break beyond the 11,000 mark a 13% move in one day before a sell-off. Plans are underway to allow investors to bet on Nasdaq Bitcoin futures while others have called for more regulation.

Both the biotech and healthcare sectors have been weak since the mid-October earnings release causing concerns about top line growth. Today the biotech sector tried to rally but with Nasdaq down they lost traction and were off their daily highs.

Maybe this is a major pivot point for a sector shift particularly with momentum driven large-cap tech stocks but take a look back into factors that have been driving biotechnology stocks in 2017. Biotech peaked in July 2015, had a vicious sell-off then tried to regain that high until mid-October 2017. It may be hard to regain that bullish sentiment. In the meantime, the broader-based Healthcare SPDR (XLV) is up 20% and holding the trend line.

Here are some of the key factors that are undoubtedly holding back the biotech sector: