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Tech Stocks Have Rebounded in 2019, But the Bulls Haven't Returned

Tech Stocks Have Rebounded in 2019, But the Bulls Haven't Returned

Citi's Levkovich Sees '10% Upside' for Equities

Technology stocks have seen solid gains since tumbling to a 15-month low late last month, but investors aren’t convinced that that low represents a bottom for the sector, which has been volatile amid questions over growth and valuation.

The S&P 500 information technology index is up 10 percent since the close of trading on Dec. 24, when it ended at its lowest since September 2017.

Among notable gainers over the same period, Nvidia Corp. has risen 17 percent, Advanced Micro Devices has climbed 22 percent and Oracle Corp. is up 13 percent. The moves have been even more sizable when it comes to some of the market’s most closely watched Internet stocks. Netflix Inc. is up more than 40 percent over that period, while Amazon.com Inc. has rallied 22 percent and Facebook Inc. has risen 16 percent. All of these, however, remain decisively below record levels.

“People were shocked at how bad fourth-quarter performance was in tech. We saw a lot of panic selling that I think was based on how quickly the stocks were going down, as opposed to fundamentals getting worse,” said Walter Price, senior portfolio manager at Allianz Global Investors, who oversees the $1.4 billion AllianzGI Technology Fund.

“I’m hopeful that panic low will hold, but it’s a little early to know,” he told Bloomberg in a phone interview. “The signs are encouraging, but it really depends on whether we see a trade deal with China. That’s a big unknown, as China is a significant source of either demand or supply for tech companies, as we saw with Apple.”

In a notable exception to the broad uptrend, Apple Inc. is up just 3.5 percent since Dec. 24, pressured after it cut its revenue outlook for the first time in almost two decades, citing weak iPhone demand in China.

The outlook underlined the risks that continue to be seen around the sector, which remains more than 16 percent below record levels.

The partial recovery in prices has not been matched by a rebound in sentiment. According to Bloomberg data, exchange-traded funds that track the technology sector have generally seen outflows even as the stocks have risen. More than $2 billion was pulled from the category in the week ended Dec. 28, followed by an additional $1.4 billion in outflows the subsequent week. Roughly $1.1 billion has been redeemed from tech-sector ETFs thus far in January.

According to BofAML’s most recent “Flow Show” report, “few are bullish tech & financials,” even with the rebound in prices.

Since Jan. 3, when the firm’s “Bull & Bear Indicator” indicated a buy signal for stocks, investors bought $6.2 billion worth of equity funds. However, they sold $600 million of tech funds over the same period.