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Tech ETFs Brush Aside Antitrust-Led Slump to Hit Highs

Sanghamitra Saha

While along with many analysts, we too believed that the latest U.S. government investigation on the largest U.S. tech companies for anticompetitive practices would be a threat to the sector, tech stocks fooled us all. Brushing aside the news, tech stocks in fact rallied and took the Nasdaq to a record high. Invesco QQQ Trust QQQ gained about 0.7% on Jul 24, the day a slump was apprehended (read: Antitrust Probe Likely to Hit These Tech ETFs).

However, big tech stocks have driven the market rally this year despite antitrust talks and trade tensions. And yesterday’s trading in tech stocks determined that the future market momentum will be decided by how solid their Q2 earnings releases will be. A likelihood of the Fed policy easing is also contributing to the rally (read: What's In Store for FAANG ETFs in Q2 Earnings?).

Facebook FB posted a solid beat on top and bottom lines in its Q2 earnings on Jul 24, which washed away all fears about FTC ruling and DoJ’s probe into big tech companies. Facebook stock was up 1.1% in the key trading session of Jul 24, while the stock advanced 0.9% after hours.

The technology sector has been on stronger ground. Rising enterprise spending, and emerging technologies like cloud computing, AI, big data and the deployment of 5G (fifth-generation) technology are the wind beneath the wings of the tech sector. The sector is cash rich too (see all technology ETFs here).

The wave of mergers and acquisitions is also providing further impetus to the sector. Apple Inc. AAPL is probably on the verge of buying Intel Corp.’s INTC smartphone-modem chip business for about $1 billion, per Wall Street Journal. The prospective deal seems a strategic fit. Apple looks primed to take full control of the entire manufacturing and seeks to bring its 5G technology online sooner than expected, which has led to its Qualcomm-agreement as well as the likely Intel deal (read: Apple May Buy Intel's 5G Modem Business, ETFs to Rally).

So far, about 30.2% of the total S&P 500 market cap have reported, of which 80% of the companies have beaten on both lines. There was slight earnings decline of 0.8% on 4.6% higher revenues to date this reporting season, per Earnings Trends published on Jul 24, 2019. It shows that the Q2 earnings performance of the etch sector has been quite satisfactory.

All these factors led the following ETFs to a 52-week of late. Below we highlight a few of these winners.

Dynamic Software Invesco ETF PSJ – Up 2.1% on Jul 24

Factset Innovative Technology SPDR XITK – Up 1.6%

Technology Alphadex First Trust FXL – Up 2.0%

Nasdaq-100 Technology Index Fund FT QTEC– Up 1.6%       

S&P Software & Services ETF SPDR XSW– Up 1.3%

Nasdaq Technology Dividend Index Fund FT TDIV – Up 1.3%

iShares US Technology ETF IYW – Up 0.9%      

Information Technology ETF Vanguard VGT – Up 0.9%

JH Technology Multifactor ETF JHMT – Up 0.7%

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Facebook, Inc. (FB) : Free Stock Analysis Report
Apple Inc. (AAPL) : Free Stock Analysis Report
Vanguard Information Technology ETF (VGT): ETF Research Reports
iShares U.S. Technology ETF (IYW): ETF Research Reports
John Hancock Multifactor Technology ETF (JHMT): ETF Research Reports
First Trust Technology AlphaDEX Fund (FXL): ETF Research Reports
SPDR S&P Software & Services ETF (XSW): ETF Research Reports
SPDR FactSet Innovative Technology ETF (XITK): ETF Research Reports
First Trust NASDAQ Technology Dividend Index Fund (TDIV): ETF Research Reports
First Trust NASDAQ-100-Technology Sector Index Fund (QTEC): ETF Research Reports
Invesco QQQ (QQQ): ETF Research Reports
Intel Corporation (INTC) : Free Stock Analysis Report
Invesco Dynamic Software ETF (PSJ): ETF Research Reports
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