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Shares of Apple, Facebook, Amazon, Google and Netflix fell to a one-year low. 

And pulled the rest of the US market.

US stock indexes for several days demonstrate a serious fall, writes Bloomberg, citing data from the auction.

  • The Nasdaq Composite on November 20 lost 117.6 points (1.67%) and by 23:30 it was 6910.85 points.
  • The index of industrial companies Dow Jones November 20 fell to 24,368 points. By 23:35, the fall was 529.52 points (2.12%), to 24,487 points.
  • Standard & Poor’s 500 to 23:35 dropped to 42.77 points (1.58%), to 2,647.88 points. At a minimum, the index fell to 2631.52 points

The fall began with the sale of shares of large technology companies, which then reached other areas, writes The Wall Street Journal: investors dumped shares in all areas from retail to oil and gas companies. Instead, they tried to invest in relatively safe assets, such as bonds and electric power companies.

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]In the short term, an unexpected weakness in the technology sector could undermine the rest of the US stock market and greatly affect the global economy.[/perfectpullquote]
Dario Perkins
TS Lombard analyst
  • Target, one of the largest US retailers, did not meet analysts’ expectations for third quarter earnings, and also announced high costs for organizing supplies and wages for workers. As a result, shares fell by 11.2%, to $ 69.07. Following him, shares of other American retailers fell: Kohl’s, L Brands and Macy’s.
  • Boeing shares on the London Stock Exchange fell 4.9% to $ 319.73. The company was supposed to hold a conference with the airlines on the safety of 737 Max liners, but canceled it.
Current situation in financial markets
[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]This is a fundamental correction. People are very concerned about the prospects for making a profit, not only in the technology sector, but also in other areas. Most likely, we will not see a V-shaped recovery. Probably, people are going to wait for the results of the next quarter to see if growth is supported.[/perfectpullquote]
Mandy Xu
Chief Credit Strategist Suisse

Why IT companies are falling

Shares of Facebook, Amazon, Apple, Netflix, and Google Alphabet (FAANG) parent holding have declined for several weeks. By November 20, the five largest technology companies lost $ 1.02 trillion and went to the “bearish” territory (a decrease of 20% or more compared to the 52-week maximum).

Percentage change from a 52-week high for each company from FAANG
Percentage change from a 52-week high for each company from FAANG

Investor confidence in large technology companies has fallen due to a slowdown in the growth of their revenues and scandals related to the security of user data.

  • Apple shares fell 4% at the close of trading on November 19. On Tuesday, the decline continued and by 23:45 Moscow time it was 4.9% – up to $ 178.63. Since early October, Apple shares have fallen by 24%. In August 2018, Apple’s capitalization reached $ 1 trillion, now it is $ 839.8 billion.

Investors fear the slowdown in sales of the main product of Apple – iPhone smartphones. On November 19, The Wall Street Journal reported , citing sources , that Apple had reduced production of the new iPhone XR, XS and XS Max, since smartphones released in September fell short of sales expectations. On November 20, the investment bank Goldman Sachs lowered the

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 recommended price for Apple shares to $ 182, compared with an early recommendation of $ 209.

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]In addition to the low demand for Apple products in China and other emerging markets, it seems you can add that the balance of price and functionality in the iPhone XR was not as warm.[/perfectpullquote]
Rod Hall
Goldman Sachs analyst
  • Facebook shares fell 5.7% on the basis of trading on November 19. On November 20, the company partially recovered its losses: by 23:45, the shares showed a slight increase: by 0.65%, to $ 132.41.

Facebook shares fell after the WSJ’s publication of controversy between Mark Zuckerberg and Facebook executive director Cheryl Sandberg because of The New York Times article that describes in detail how the company ignored and then tried to hide the use of the social network to interfere in the US elections in 2016 .

  • Amazon shares at the end of trading on November 19 fell by 5.1%. November 20, the rate of decline fell to 0.72%. By 23:45, online retailer stocks were trading at a price of $ 1,501.83.

Amazon shares continue to fall after the company published forecasts for the fourth quarter in October , which did not meet the expectations of analysts and investors.

Alphabet and Netflix showed declines along with the rest of the FAANG participants.

Other causes of fever

US stock indices are feeling a lot of pressure due to investors’ concerns about the US-China trade war, in which both countries introduced import duties for certain goods in 2018. Investors fear that amid tightening opposition to global economic growth may slow down, explained Sean Cruz, managing director of the brokerage for TD Ameritrade brokerage , told CNBC.

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]This is really a serious factor, and it is clearly visible in the IT sector. These companies are the most affected by the development of negotiations between the United States and China.[/perfectpullquote]
Sean cruz
TD Ameritrade Trading Strategy Manager

At the APEC summit, which ended on Sunday November 18, US Vice President Mike Pence said that the US is ready to introduce new duties in addition to the existing tariffs on the import of Chinese goods worth $ 250 billion if Beijing does not revise its relationship strategy.

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