Markets were rocked in Tuesday trading as worries continued to
pile up over the Washington D.C.-standoff. Republicans and
democrats still appear to be far apart on most issues, and there is
little hope for either side compromising at this time.
Comments from President Obama didn't help matters either, as the
sell-off actually intensified during his talk with the press about
the situation. Thanks to this, markets finished down about 1.1% for
the Dow, and 1.2% for the S&P 500, while the tech-heavy Nasdaq
tumbled by 2% on the day (read
Play Political Gridlock with These 3 Volatility
This stark underperformance in the Nasdaq was the real story of the
session, as it suggested that technology names led the way on the
downside. This was definitely the case too, as a number of hot,
high beta technology names like
plunged by more than 6.6% on the day.
This was far in excess of other technology names-like Cisco or
Apple for example-suggested that the bulk of the pressure was
concentrated in the higher volatility corners of the technology
world. It also could mean that traders are starting to pull money
out of these high flyers, as concerns continue to build over a
positive resolution to the current government crisis.
Should the trend continue, higher beta-and up until now strong
performing-names in the technology world could clearly be victims
of the D.C.-dysfunction. This means that sector ETFs tracking these
high beta corners of the market are likely avoids in the short
term, but also due for a sharp move higher if Washington gets its
So, it might be a good idea to pay close attention to the trends in
the following funds in the days ahead, as either way they could see
some big moves, depending on if the crisis deepens, or if a
solution is somehow found in short order:
First Trust Dow Jones Internet Index Fund (
) - down 3.5%
This internet-focused ETF tumbled in Tuesday trading as its
portfolio of high beta names struggled. The fund focuses on
companies that derive at least half of their revenues from the
internet, holding 41 stocks in its basket (see
all the Technology ETFs here
Top holdings include names like Google, Amazon, and Facebook, all
of which account for less than 10% of assets. Since the fund
focuses a bit less on 'new tech' names and has significant holdings
in more established names, it wasn't as hurt in Tuesday's session.
Still, the ETF does offer a significant component to the new tech
world, including FB, Netflix, and LinkedIn all in its top ten
holdings. Thanks to this, FDN lost more than broad tech funds like
(down 1.6% on the day), but less than some of the more new
tech-focused firms out there.
PowerShares NASDAQ Internet Portfolio (
) - down 4.1%
For another play on the internet market, investors have
PowerShares' PNQI. This ETF tracks the NASDAQ Internet Index,
holding about 80 names in its basket, and charging investors 60
basis points for the exposure (see
New Leadership in the Tech ETF Space?
The fund has been a solid performer as of late, and it has
significant holdings in many of the new age tech companies,
including top ten allocations to FB, PCLN, YNDX, NFLX, and TRIP.
The fund does still have allocations to the old guard though, as
Amazon, eBay, and Google are all in the top five for holdings,
accounting for more than 7.2% of assets each.
Many of the so-called web 2.0 companies led on the way up, leading
to huge gains for PNQI. However, these big winners have obviously
fallen on hard times in the debt debate, pushing this fund down
almost 2.5 times as much as the broad tech index for Tuesday's
Global X Social Media Index ETF (
) - down 4.3%
Social media stocks have come into focus as of late, largely led by
the incredible resurgence of FB. This company, along with the rest
of the sector, has seen strong performances, leading to huge gains
for the space (See
3 Biggest ETF Winners from the Third Quarter
One of the few ways to track this market in ETF form is with SOCL,
a relatively new ETF from Global X that follows the Solactive
Social Media Index. This benchmark holds about 30 stocks in its
basket, putting heavy weights in both U.S. firms like Facebook
(13.1%) and LinkedIn (9.1%), as well as international giants like
Tencent (11.9%), and Sina (11.9%).
Thanks to this focus on the social media space and the heavy
international exposure, SOCL was up over 50% for the first nine
months of the year. However, in the recent turmoil, SOCL has
struggled, leading some to wonder if this high beta sector's run is
over for now.
Although many technology stocks have little to do with the
government gridlock, they have been punished more than most lately.
Stocks in technology easily led the way on the downside in
Tuesday trading, with huge moves lower seen in some once-high
flying stocks (see instead
3 Hot Sector ETFs Surging to #1 Ranks
Given this trend, this space could definitely be one to keep an eye
on as the shutdown drags on, and the debt ceiling looms. The
aforementioned ETFs could either be among the biggest losers in the
crisis, or, if a speedy resolution is found, intriguing buys for
those willing to take on some heavy volatility at this uncertain
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FACEBOOK INC-A (FB): Free Stock Analysis Report
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