The power the world's technology giants wielded over the U.S. stock market for years as it surged to record highs has been greatly diminished by the bust of 2022.
Even after last week's rally, Apple Inc., Microsoft Corp., Amazon.com Inc., Alphabet Inc. and Meta Platforms Inc. have lost more than $3 trillion in market value this year as slowing revenue growth and rising interest rates battered valuations.
That's cut their weighting in the S&P 500 Index to about 19% from a record of more than 24% in September 2020.
The shift shows how much the contours of the stock market have shifted since the Federal Reserve made a sharp break from the easy money policies that set off a speculative frenzy.
As the tech sector's sway diminishes, more traditional sectors such as energy and banking are accounting for a greater share of the S&P 500, with companies like Exxon Mobil Corp. and Wells Fargo & Co. benefiting from high oil prices or rising interest rates.
The reversal of fortunes means that investors who piled into the S&P 500 back when tech stocks were surging are now far less exposed to the sector — and its potential rebound — than they were before. By the end of 2021, there was about $7 trillion invested in funds that are tied to the index.
"The average investor doesn't have a clue about this stuff," said Michael Mullaney, director of global market research at Boston Partners. "This is going to be something that plays out not just this year but into next year and longer."
Key Tech Issues
The technology sector got some relief from data on Thursday that showed inflation slowed more than expected in October, fueling optimism that the Fed could soon pause its most aggressive cycle of interest-rate hikes in decades. That sent the Nasdaq 100 Index up 9.4% on Thursday and Friday for its best two-day performance since 2008.
