Spencer Platt | Getty Images News | Getty Images
NEW YORK, NY – NOVEMBER 13: Traders work on the floor of the New York Stock Exchange (NYSE) on November 13, 2018 a day after the Dow Jones Industrial Average fell by 600 points on concerns about profits in tech companies and consequences of a growing trade war.
“This looks like lingering worries about what triggered the October decline. That’s worries about an economic slowdown,” said Craig Callahan, president at Icon Funds. “I think these people are wrong, but they’re in control at this time.”
Stocks fell sharply last month amid heightened concerns about rising interest rates, slowing economic growth and global trade tensions. The S&P 500 fell 6.9 percent in October while the Dow lost 5.1 percent of its value. At current levels, the Dow is barely above the closing low during the October sell-off and 1.4 percent from its intraday low hit during the market turmoil last month.
Tuesday’s decline came a day after members of the popular “FAANG” trade —Facebook, Amazon, Apple, Netflix and Google-parent Alphabet — all closed in a bear market, down more than 20 percent from their 52-week highs. The S&P 500 and Nasdaq dropped 1.7 percent and 3 percent, respectively, on Monday while the Dow fell 1.4 percent.
Apple has been leading the charge lower for FAANG stocks as investors worry sales for the company’s flagship product, the iPhone, will slow down. Most recently, Goldman Sachs slashed its price target on Apple on Tuesday, noting that “in addition to weakness in demand for Apple’s products in China … it also looks like the balance of price and features in the iPhone XR may not have been well-received.”
“Short term, unexpected weakness in the tech sector could have a significant impact on the global economy, adding to what already looks like a soggier macro environment,” said Dario Perkins, managing director of global macro at TS Lombard, in a note. “Additional retrenchment in the FAANGs could also undermine the broader US stock market.”
FAANG stocks traded in a wide range Tuesday. The group of stocks started the day trading down sharply, but they managed to recover most of their losses. Facebook and Alphabet notched slight gains after their initial decline, while Amazon and Netflix closed about 1 percent lower. Apple closed 4.8 percent lower.