FANG Stocks Take Repeated Hits and the World Keeps Spinning

  • Group drops almost 7 percent in August as S&P 500 hits high
  • Rotation into financials, energy shares boosts market

Shockingly, a drawdown in this year’s most celebrated technology megacaps has failed to ignite a reprise of the Crash of ’29.

You may have missed it, but the FANG block -- Facebook Inc., Amazon.com Inc. Netflix Inc. and Google parent Alphabet Inc. -- dropped almost 7 percent during the August selloff, while Apple Inc. was down 3.5 percent from its 2017 peak at its worst point. But even with all the carnage, the S&P 500 kept going up, climbing above 2,500 for the first time.

The divergence is a rebuttal to anyone who predicted a reversal in the tech giants would sound the death knell of the bull market. Such warnings were at a fever pitch in July, as the group’s rally reached breakneck pace. Up an average of about 30 percent in the first seven months of 2017, the top five American stocks, all tech related, were responsible for almost one third of the S&P 500’s advance.

But, as the FANGs have gone, so has not gone the broader market. The reason is simple: investors found their way into laggards such as financial and energy stocks and the rotation kept the market buoyant.

“The recent weakness in the FAANGs has not produced the kind of trouble for the markets a lot of us thought it might,” Matt Maley, an equity strategist at Miller Tabak & Co. in New York, wrote in a note to clients. “The fact that the all the averages have been able to stay at/near all-time highs while these leadership stocks have been sliding lower for two months, should probably be seen as positive.”

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