Dragged down by tech heavyweights Amazon and Apple, the S&P 500 slid into correction territory on Friday - for the second time in 2022. The capitalization-weighted index dropped 3.6 percent on the last trading day of April, as Amazon and Apple lost 14 and 3.7 percent, respectively, after delivering disappointing quarterly results and/or a very cautious outlook the day before. The S&P 500 ended the month at 4,131.93, down more than 10 percent from its March 29 high. That kind of drop from a previous high, called a correction, only occurred 11 times since the turn of the century, last in February 2022 and in March 2020 before that.
Interestingly, some of the biggest winners of the past few years, the so-called GAFAM group (technically it’s AMAMA now), are currently dragging the market down with them. As the following chart shows, the world’s largest and certainly most prominent tech companies are all far off their previous highs, having collectively lost almost $2 trillion in market capitalization since the beginning of the year.
The global chip shortage, regulatory headwinds, inflation pressure and rising interest rates have soured the outlook for big tech after a decade of almost uninterrupted growth. Looking beyond the past few months, there’s no need to feel sorry for the companies’ shareholders, however, as they largely rallied through the past two years, despite the pandemic disrupting many other industries.