(Bloomberg) -- For months, megacap tech shares powered US stocks to dizzying gains. The market’s engine is now starting to sputter.Most Read from BloombergHong Kong Extends Shutdown After Record Rain Overwhelms CityApple’s 2-Day Slide Nears $200 Billion on China IPhone CurbsTrudeau Says There’s No Room for Political Rapprochement With ChinaChina Seeks to Broaden iPhone Ban to State Firms, AgenciesUS Probes Made-in-China Chip as Alarm Over Huawei GrowsThe latest sign of trouble came from Apple In
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.
Excitement over AI and signs the Fed was nearing the end of its tightening cycle drove the Nasdaq 100 to a 39% gain in the first half of the year. But the backdrop has turned less friendly, with rising Treasury yields among the threats to the group’s sky-high valuations. The tech-heavy index is virtually flat so far in the third quarter after dropping 0.7% on Thursday. Apple fell 2.9% for a two-day slide of more than 6%.
Keith Lerner, co-chief investment officer at Truist Advisory Services, said long-term bets on tech make sense, but crowding and other near-term concerns had caused him to recently turn neutral on the sector. UBS Global Wealth Management said last week that relative to the multiple of the S&P 500 Index, the tech sector’s price-to-earnings ratio stands at “its highest level since the global financial crisis.”
“The reason I’m so generally cautious is that investors are already overweight on tech, and for it to outperform further, they would need to further increase their weighting,” he said. “Given how much multiples have risen, it is more likely they cut their weighting, which would mean a lot of selling pressure.”
Morgan Stanley’s Michael Wilson, a noted equity bear, told Bloomberg Radio that this was “another negative technical signal that the rally is exhausted.”The US government has begun an official probe into an advanced made-in-China chip housed within Huawei Technologies Co.’s latest smartphone, a revelation that’s set off a debate in Washington about the efficacy of sanctions intended to contain a geopolitical rival.
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