NEW YORK – Big Tech stocks are flexing their enormous strength again, after getting knocked around a bit earlier this year.
Apple, Microsoft, Amazon, Google's parent company and Facebook all gave profit reports this week that blew past investors' already high expectations. Apple earned 40% more than what Wall Street forecast, for example, leading one analyst to call it a “drop the mic” performance.
The blowout reports are forcing the spotlight back onto this group of stocks that dominate the market like no fivesome ever has before, especially after they lagged behind earlier this year. Shares of each of the Big Five companies jumped between 7% and 16.5% in April, easily beating the S&P 500′s 5.2% rise over the month.
The financial results give some validation to investors who bid up the stocks through the pandemic on expectations they'd weave themselves deeper into everyone's lives, even as the broader economy collapsed around them. Amazon's $108.5 billion in sales last quarter helps show that it “is emerging from the pandemic in an even stronger position than it was before,” UBS analysts led by Michael Lasser said in a report, for example.
Altogether, the five companies make up 21.6% of the S&P 500's entire market value, according to FactSet. That's actually down from the nearly 24% they accounted for at the end of August. But it's a reassertion of their strength after that figure shrunk to 20.7% at the end of March, according to S&P Dow Jones Indices.
It might sound academic, but it's a huge deal for investors and their 401(k) accounts. They've increasingly put their money into funds that precisely mimic the S&P 500 and other indexes. That means someone putting $100 into an S&P 500 index fund now is devoting nearly $22 to just five companies.
Investors saw the downside of concentrating their bets in such a way earlier this year, when Big Tech stocks suddenly lost momentum amid a sharp rise in interest rates.
Apple fell 8.1% in February, for example, while Amazon was virtually flat in March, when the S&P 500 was jumping 4.2%. The sluggish performance for Big Tech held back index funds, and on some days the group singlehandedly sent the S&P 500 to a loss instead of the gain.