The “FAANG” Stocks Still Have a Chokehold on the Market


After a brave start last week, the market hit a snag on Meta Platforms (NASDAQ:FB)’s (AKA “Facebook”) earnings report. The stock dropped more than 26% in 24 hours, which was the largest one-day market value drop of any stock.

A cellphone displays the apps for the FAANG companies -- Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX) and Alphabet (GOOGL)

Source: Koshiro K /

But it kind of makes you wonder… who cares that much about Facebook?

If you have caught any market news over the last few years, you’ve probably heard the term “FAANG stocks” which refers to Facebook, Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL), Netflix (NASDAQ:NFLX), and Google’s parent company, Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL).

The reason investors care about the FAANGs is that they have disproportionate influence to drive the market one direction or the other. Having one of them fall on its face like FB did shook investor sentiment.

Not even Amazon’s huge surprise earnings on Thursday afternoon was enough to completely repair the damage.

Sentiment is a tricky thing to define; investors value stocks based on what they think their performance will be in the future — not what they are doing right now. Those guesses are very optimistic right now, but the outlook can change quickly with bad news like the FB report.

But it’s not time to worry. Not yet.

Overall, market fundamentals are still strong. Some overvalued stocks like FB might take a hit, but it shouldn’t affect a market still being driven by job and wage gains.

Eventually, we expect the forecast to dim, but for now, we stand by what we said last week — this is a chance to add stocks with big growth prospects while they are at a low.

On Our Watchlist

  • We still maintain our positive outlook for energy stocks, which are up 24% year to date. The summer is still a little way off, but investors should start pricing in expectations for rising demand in Q2 and Q3 for gasoline. This is a great way to turn the pain you feel at the pump into an opportunity to make some money in your brokerage account.
  • We also think that Snap (NYSE:SNAP) is at a very interesting position right now. The company turned their first quarterly profit, which is especially impressive considering the troubles companies like Meta Platforms are having with Apple’s new privacy policy rules. SNAP reported that users are up 20% on a year-over-year basis as they capture more of the younger generation.

Keep in mind, the stocks that are on our watchlist are not official recommendations. We do, however, recommend two to three trades per week in our Strategic Trader elite research service. Last week, we booked…

  • 4.53% (145.37% annualized) on NKE puts in 18 days…
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Looking Ahead

It’s still earnings season, but we don’t think there will be any other big threats to sentiment this week. About three weeks after the start of earnings season, the big retail, consumer staples, and healthcare stocks start reporting, but we have enough data at this point to be optimistic about the overall outcome.

However, we do think it will be worth paying a little extra attention to some of the restaurant stocks that will be out with earnings reports. Eating out is a good leading indicator for consumer behavior, so the outlook from Chipotle Mexican Grill Inc. (NYSE:CMG) on Tuesday afternoon and Yum! Brands Inc. (NYSE:YUM) on Wednesday morning are worth watching.

From an economic perspective, this coming week should be pretty quiet until Thursday when the U.S. Bureau of Labor Statistics will release the most recent Consumer Price Index (CPI). Everyone knows inflation is a problem, and it can drag on stock returns if it spikes back up again like it did in the fourth quarter last year.

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