For months, megacap tech shares powered US stocks to dizzying gains. The market’s engine is now starting to sputter.
The latest sign of trouble came from Apple Inc., where reports that China plans to expand a ban on the use of iPhones in some government agencies sent shares to the worst two-day drop in a month. Apple suppliers such as Qualcomm Inc. and Skyworks Solutions Inc. sank more than 7% Thursday, while Microsoft Corp. and Nvidia Corp. remained under pressure.
The timing could hardly be worse for fund managers who turned bullish on megacap tech in recent weeks, tilting their portfolios harder toward the seven biggest companies, including Amazon.com Inc. and Alphabet Inc. That could rob the market of dip buyers looking to make up ground. At the same time, the hysteria over artificial intelligence applications is abating and the Federal Reserve signaled it remains bent on keeping rates elevated.
“Where tech goes is going to be where the US equity market goes,” said Greg Boutle, head of US equity and derivative strategy at BNP Paribas. “Tech has shown such strong leadership that if it rolls over, it’s going to be very, very challenging for the market to perform.”