In the wake of the historic decision by the Federal Reserve to raise interest rates for the first time since 2006 this week, stocks have been pushed lower, with the Dow Jones Industrial Average back near its two-month lows.
Well, most stocks are being pushed lower.
Measures of market breadth — or the broadness of buying demand — are collapsing as a narrowing group of stocks keep the major averages like the Dow from suffering deeper losses. The percentage of S&P 500 stocks in uptrends is near 54% — down from more than 72% in November.
The bulls are relying on the so-called “FANG” big-tech momentum stocks, which seem impervious to any downside pressure. I’m talking about Facebook (FB), Amazon (AMZN), Netflix (NFLX) and Alphabet (GOOG, GOOGL). (The moniker was created before GOOGL’s idiotic name change.)
But like an army marching with just its generals, this condition cannot last and will likely be resolved to the downside as the FANG stocks catch up to weakness being seen in areas including small-cap stocks, transports, utility and energy stocks, as well as high-yield corporate bonds and commodities.
Here’s a closer look at all four.
FANG Stocks Set for a Fall: Facebook Inc (FB)
Facebook (FB) shares are perched precariously in a three-month trading range centered near $105 as concerns grow over near-term margins as the company pushes ahead with its Oculus VR headset launch. A retest of the 200-day moving average looks likely.
FB will report results on Jan. 26 after the close. Analysts are looking for earnings of 67 cents per share on revenues of $5.4 billion.
FANG Stocks Set for a Fall: Amazon.com, Inc. (AMZN)
Amazon (AMZN) has been helped by a couple quarter of surprise profitability as it yanked the chain on expense control and trimmed capital expenditures. But shares have recently hit resistance at $675 and look set for a test of their 50-day moving average on likely disappointment in overall holiday retail sales.
AMZN will report results next on Jan. 27 after the close. Analysts are looking for earnings of $1.65 per share on earnings of nearly $36 billion.
FANG Stocks Set for a Fall: Netflix, Inc. (NFLX)
Netflix (NFLX) shares remain troubled by resistance near their August highs as investors have grown concerned about underwhelming U.S. user metric growth last quarter — which management blamed on the changeover to chip-based credit and debit cards.
NFLX will next report results on Jan. 18 after the close. Analysts are looking for earnings of just 2 cents per share on $1.8 billion in revenue.
FANG Stocks Set for a Fall: Alphabet Inc (GOOG, GOOGL)
Alphabet (GOOG, GOOGL) shares have topped out in a three-month trading range, with the $775 level offering resistance. Investors are supposed to be excited about the company’s name change and corporate reorganization, which apparently will offer more insight into the profitability of GOOGL’s core business.
That’s not exactly the most exciting motivation to buy a stock that’s expensive after an impressive rally out of its summertime lull near $550.
Alphabet will next release results on Jan. 28 after the close. Analysts are looking for earnings of $8.09 per share on revenues of $20.8 billion.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.
