Magnificent Seven Witness a $370 Billion Erosion in the Last 4 Days

In the initial four days of the new year, the stellar performance of the technology giants, often referred to as the Magnificent Seven, has taken a hit.

These technology stocks have witnessed a staggering $370 billion collective loss. This downturn marks the lengthiest losing streak in a month for these industry leaders: Apple Inc., Amazon.com Inc., Alphabet Inc., Microsoft Corp., Meta Platforms Inc., Tesla Inc., and Nvidia Corp. 

Apple’s 4.81% Drop Sparks Prolonged Losing Streak

Apple and Amazon led the decline by experiencing a 4.81% and 3.2% drop, respectively, while Alphabet had the slightest drop at 0.65%.

The shift in trajectory signals that investor scepticism about the sustainability of the 2023 rally may have been well-founded. Despite an impressive surge of over 100% in the past year, fueled by heightened interest in artificial intelligence, the latter half of 2023 saw a cooling-off period. 

Investors deliberated on the Federal Reserve’s capacity to orchestrate a soft landing for the US economy. Such a scenario would entail fewer interest rate cuts than previously anticipated.

Steve Sosnick, Chief Strategist at Interactive Brokers Group, remarked, “We don’t know if last year’s rally has fully ended, but it is completely normal to expect markets will pull back after a rally like we saw. Without the year-end factors that turbocharged the rally, I think we’re seeing the party winding down.”

Challenges Mount for Magnificent Seven

Certain members of the Magnificent Seven have encountered additional challenges early in the year. Apple, for instance, has faced a downturn after receiving a bearish outlook; analysts at Barclays Plc downgraded the tech giant’s shares, citing expectations of soft demand for iPhones in the foreseeable future. 

Meanwhile, Tesla has seen an almost 9% dip over the past four days, marking its lengthiest losing streak in over four weeks. Despite exceeding analysts’ expectations in delivering electric vehicles in the fourth quarter, Tesla relinquished its position as the leading seller of electric cars to China’s BYD Co.

While it might be premature to declare the end of the tech-focused rally, the outlook for 2024 remains challenging for the industry titans. The gains of 2023, which largely recuperated losses from the preceding year, indicate a complex landscape. Although some group members, including Amazon, Alphabet, Meta, and Tesla, are still below their all-time highs, suggesting potential for further growth, the road ahead demands a continuation of technological innovation and sustained profitability, according to Sosnick.

The prevailing concern or sentiment expressed by investors is that the overbought conditions and euphoria in both bond yields and stocks may pave the way for a reversal at the beginning of 2024. The overbought conditions and sentiment readings are challenging to dispute.

stated Dennis DeBusschere, the founder of 22V Research

On Wednesday, Axel Rudolph, senior market analyst at online broker IG, noted that “global stock indices persist in their decline due to reassessed rate cut expectations and heightened tensions in the Middle East.”