Amazon plunges to lowest level since May as major technical weakness continues

Losses were widespread across the group, with the megacap name, semiconductor stocks and software sectors all faltering. The conglomerate led a broader decline in the US equity market, and the Nasdaq 100 index fell more than 2%.

The decline came as yields on 10-year US Treasury notes rose to 1.8%, the highest in nearly two years. Higher rates are seen as a challenge for high-growth and relatively expensive stocks because they reduce the present value of future earnings.

Among notable movers, Amazon.com Inc fell 3.4% to trade its lowest intraday trade since May. The stock is down nearly 15% from its November peak and is down for the fifth consecutive session.

BofA confirmed a buy rating and $4,450 price target on the stock, writing that it expects 2022 to “end better than it started.” The firm has Amazon as the top megacap pick, and it expects various headwinds, including supply chain and labor issues, declining e-commerce growth, and multi-compression — to “ease throughout the year.”

Alphabet Inc. fell 2.8% and is still down for the fifth day, its longest such streak since November 2019. The stock is down nearly 8% during the five-day slump and is trading at its lowest level since October.

Among other names, Microsoft Corp fell 2.7% to its lowest level since October. Microsoft and Alphabet are both coming out of their biggest one-week percentage drop since March 2020. Also on Monday, Apple Inc. 2.1% in and Meta Platforms Inc. declined by 4.5%. Tesla Inc fell 2.8%.

The Philadelphia Stock Exchange Semiconductor Index dropped 2.4%. Among notable names, Nvidia Corp dropped 5.4%, Advanced Micro Devices fell 3.4%, Marvell declined 5.1% and Micron Technology dropped 2.8%.

Mizuho Securities managing director Jordan Klein said the chipmakers’ weakness is following a similar slowdown in software names.

“Could this be a sign of an altogether wider rotation of tech, with exposure to the group that did the best in tech during ’21 now decreasing?” He writes in a note. Semi, he said, “take a high relative risk if it becomes a general rotation out of technology as a whole, where a low relative valuation doesn’t help.”

The iShares Extended Tech-Software Sector exchange-traded fund fell 3.2% on Monday. The ETF is down more than 20% from its November peak, touching its lowest level since June.

Given the scale of the software weakness, some analysts are beginning to see bargains in the group. Earlier, William Blair wrote that the rotation of software would be “short-term as the sector benefits from strong secular growth trends.” Analyst Bhawan Suri is “confident that the software industry will demonstrate sustainable growth and that the overall business fundamentals will be kept intact.”