Tech stocks took another beating as retail investors dump the Magnificent Seven
Technology stocks fell yesterday after president Trump announced in an “announcement” that he would impose a new 25% tariff on imports of computer chips from foreign countries. Every stock of the Magnificent Seven tech company was down at the closing bell yesterday. Meta was the worst, down 2.47%. Oracle (not in Mag 7 but closely related) fell 4.29%, perhaps because it is the hyperscaler most reliant on imported chips for its AI data center business.
The S&P 500 closed down 0.53%.
However, this morning, S&P futures rose 0.36% before the opening bell. Traders may be encouraged by the fact that there is a rotation away from the Mag 7 among investors in S&P 500 stocks. The index fell yesterday largely due to the extremely poor performance of the Mag 7. But the “equal weight” S&P 500 index actually rose by 0.41%. It is up 3.62% this year while the regular index is up just 1.18%.
The implication is that traders are selling Mag 7 but buying most other stocks.
Deutsche Bank reported that 318 S&P 500 stocks rose yesterday. “There is still a lot of resilience among stocks more broadly, with most S&P components still advancing… We’ve seen more of the rotation pattern in place since the beginning of the year, with the small-cap Russell 2000 (+0.70%) setting a new record as it outperformed the S&P 500 for the ninth straight session. In fact, the Russell 2000 is now up +6.84% year-to-date, in contrast to a -1.49% for the Mag-7,” Jim Reid and his team told clients this morning.
As usual, retail investors led the way, according to JPMorgan. “Last week was exceptional for retail trading, as it maintained the momentum seen earlier this year. Retail investors bought $12.0 billion worth of penny stocks – the largest weekly inflow since the V-shaped recovery after liberalization day,” Arun Jain and his team told clients.
Most of that was purchased in the form of exchange-traded funds, but $4.9 billion came through trades in individual stocks that were… no Mag 7. Retail investors bought non-Mag 7 technology stocks at a rate of 3.7 times a standard deviation above the mean, Jain calculated.
It is worth noting that Mag 7’s collapse was driven in part by White House policy announcements. On this topic, Dan Ivaskin, chief investment officer at Pimco, told the Financial Times that he was working to “diversify” asset managers’ portfolios away from US stocks precisely because the president’s economic policies are so volatile.
“It is important to appreciate that this administration is completely unpredictable,” he said. “We are working to diversify…We think we are in a multi-year period of some diversification away from US assets.”
ING’s Chris Turner said something similar in his note this morning. Referring to the violent fluctuations in oil prices, caused by Trump’s repeated threats to bomb Iran, and the White House’s criminal investigation into US Federal Reserve Chairman Jerome Powell, he said: “Investors remain reluctant to chase new topics emerging from Washington due to fears of a policy reversal. This is perhaps the reason why the dollar and Treasuries were not sold in the legal investigation into Fed Chairman Powell. Ultimately, however, we believe that this attack on the Fed will add to the case for de-dollarization.”
Here’s a quick snapshot of the markets before the opening bell in New York this morning:
- Standard & Poor’s 500 Futures rose 0.36% this morning. The last session closed with a decrease of 0.53%.
- Stokes Europe 600 It rose by 0.37% in early trading.
- FTSE 100 index in the United Kingdom It rose 0.5% in early trading.
- Japan’s Nikkei 225 Decreased by 0.42%.
- China CSI 300 It rose by 0.2%.
- South Korea Cosby It rose by 1.58%.
- India Nifty 50 Decreased by 0.26%.
- Bitcoin It reached 96.7 thousand dollars.
2026-01-15 11:29:00
