NEW YORK—Technology stocks are bearing the brunt of a recent market selloff, putting a spotlight on how an extended downturn in the sector could weigh on broader equity indexes.
After Monday’s sharp drop, the S&P 500 technology sector is down 6.7 percent since the overall S&P 500 closed at a record on Sept. 2, compared with a 5.2 percent decline for the broader index over that time.
The tech-heavy Nasdaq Composite, meanwhile, is down 7.3 percent from its Sept. 7 closing high, getting closer to marking a 10 percent correction.
The tumble comes amid a cluster of worries that hit markets in recent weeks, including a looming unwind of the Federal Reserve’s easy money policies, a jump in Treasury yields and a nasty battle among lawmakers over the U.S. debt ceiling.
Many investors are hesitant to cut their exposure to technology-focused stocks, which have led markets for most of the last decade and are expected to deliver strong earnings growth even if the economic climate worsens. Previous dips over the years have often been met by furious buying.
Still, a heavy weighting in broader indexes, comparatively elevated valuations and wide ownership have led some investors to worry over the repercussions of a prolonged period of underperformance for tech and tech-related names.
A Crowded Trade
Years of solid performance have made tech stocks a mainstay in portfolios across Wall Street, periodically spurring concerns that they may be susceptible to violent market swings if investors try to sell all at once.Facebook, Amazon, Microsoft, and Google-parent Alphabet have ranked among the top five most popular hedge fund long positions for the past 15 consecutive quarters, a study by Goldman Sachs showed.
