Tech Stocks Escape From Correction Territory - Barron's

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The Nasdaq Composite has fallen about 4% this week.
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Technology stocks briefly touched “correction” territory on Friday, as the recent decline on the Nasdaq Composite extended beyond 10%. At the index’s worst levels of the session, it was down 11.9% from its Feb. 12 close at 14,095.47. But the Nasdaq rallied back into the green in midafternoon trading.

Even after rebounding from this morning’s deep losses, tech shares are off about 4% for the week and roughly 1% for the year to date, pressured by rising interest rates and a rotation out of technology shares and into more economically sensitive sectors, like energy, industrials, and finance. The 10-year Treasury yield is up slightly at 1.56%, but eclipsed the 1.6% level earlier in Friday’s session.

The market continues to mete out particularly harsh punishment to the stocks that led the way in 2020—high-multiple, high-growth, as well as newly public cloud shares. The ARK Innovation ETF (ARKK), a popular exchange-traded fund with big positions in recent highfliers like Tesla (TSLA), Roku (ROKU) and Teledoc (RDOC), is off 2.4% on the session and down 26% since its mid-February peak.

Aiding the index on Friday were a flurry of bullish recommendations on legacy tech stocks. Oracle (ORCL) is trading sharply higher on a Barclays upgrade, J.P. Morgan turned bullish on Cisco (CSCO), Goldman lifted its rating on Western Digital (WDC) and Morgan Stanley pounded the table on Microsoft (MSFT). Analysts are increasingly focused on the potential for enterprise tech hardware and software stocks to get a boost from an expected pickup in spending later this year. All four stocks are trading higher.

Cloud stocks have turned mixed, but high-multiple names like Palantir Technologies (PLTR), C3. ai (AI), Snowflake (SNOW), Zoom Video Communications (ZOOM), and Shopify (SHOP) all remain in the red on the session. Chip stocks are mostly higher, as investors look for ways to play ongoing supply constraints, with so-called “e-tail” stocks extending recent losses as the market anticipates a reopening of the economy later this year.

At about mid-session, the Nasdaq Composite had recouped its earlier losses and was sitting close to the flat line at 12,736.66. That is about 50 points above correction territory.

Write to Eric J. Savitz at eric.savitz@barrons.com

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