foxex: Tech Leads

Chart Advisor | Focus on the Price

Tuesday, October 15, 2019

1. Tech Leads as Stocks Move Higher

2. Apple Separates from the Pack

3. Intel Not Nimble Enough To Keep Up

Market Moves

As stocks broke higher to kick off earnings season, investors shrugged off a mixed bag of earnings reports from the financial sector and focused on big tech companies. With the Nasdaq 100 index (NDX) closing 1.28% higher, many tech stocks broke out to all time high prices.

Among the stocks that broke through previous price levels to close at new 52-week highs was Microsoft (MSFT). Shares of MSFT closed 1.45% higher to mark the stock's highest closing price yet. Apple (AAPL) also closed lower today, but only after reaching a new 52-week high in yesterday's session. These two stocks are heavy components of the major market indexes and it's a good bet that if these stocks are continuing higher then the rest of the market will also continue to rise.

Apple Separates from the Pack

Shares of Apple (AAPL) have shown a surprising divergence from the other major technology companies that have dominated stock market headlines in recent years. The pack of five stocks, known as the FAANGs, have been among the strongest growth stories over the past three years. But something seems to be changing throughout the latter half of 2019. The share price for AAPL has separated itself and is moving distinctly higher than the remaining stocks in the group. The chart below compares an equal-weighted portfolio of Facebook (FB), Amazon (AMZN), Netflix (NFLX), and Google (GOOG) to AAPL shares. At this point in the year the difference is stark as AAPL shares have topped 50% gain year-to-date, while the four-stock portfolio has not managed half of that performance.

Why Apple's Stock Is Soaring as Fellow FAANGs Languish

Big Tech Stocks Could Rally Into Year End

Intel Not Nimble Enough To Keep Up

Despite the surge in tech stocks today, and in semiconductor stocks particularly, one notable laggard is Intel (INTC). The iconic chip maker that redefined silicon manufacturing for decades has been left behind in the recent rally. Any number of reasons can be given for this, whether it be the company's growing capital expenditure requirement, the trade war discussions, or the prominence of smartphones over PCs. But the reality is Intel has fallen out of favor with investors. Which is surprising considering that the company continues to beat estimates and pay a predictable dividend. It may be that the upcoming quarterly earnings report will wake up many investors who have overlooked the fact that the company has reliably hit and exceeded forecasts over the years. Until then investors and analysts will have to be satisfied with market-matching performance from the company.

The Bottom Line

Stocks broke higher with many companies in the technology sector closing at new 52-week highs. Apple outpaced the other stocks in the FAANG acronym, Microsoft led the Nasdaq 100 higher, and Intel is lagging behind the semiconductors. The semiconductor stocks are doing so well that they draw attention to whether Intel might be a good value ahead of its earnings report.

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