Investors are finding a lot to like in technology, even as the bottom of the market remains elusive By Bloomberg

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(Bloomberg) — Even as the Federal Reserve raises interest rates and tech stocks slump, it’s getting harder to walk away from the sector.

On the other hand, there’s a lot to like: It’s now 35% cheaper than it was at its peak in 2020, huge companies like Apple Inc (NASDAQ :). They’re still filling their coffers with cash and earnings forecasts show no sign of slowing significantly.

The index fell 0.8 percent on Thursday and is down about 30 percent so far this year.

But the Fed. Market talk going into Wednesday’s monetary policy meeting was that there is a high potential for a rebound in the tech sector if, as expected, the central bank raises its benchmark interest rate by 75 basis points. Turns out it wasn’t that simple. The Nasdaq 100 fell to lows in early July, largely erasing most of the summer rally, after a hawkish tone than the Fed had hoped.

So why not avoid technology until the dust has settled? This is not an option for most institutional investors, given that the industry is the largest in the world at roughly 27% of the benchmark. If tech stocks turn around and lose ground, it could be the end of your career.

Thus stock pickers gravitate towards “quality” companies with long-standing business or stock schemes. Apple Inc. fell. By only 13% this year. T-Mobile US (NASDAQ 🙂 Inc. Palo Alto Networks (NASDAQ :), cybersecurity company. and Texas Instrument Inc.

“Look for companies with high market share, a good moat, and low substitution risk,” said Brian Battle, director of trading at Performance Trust Capital Partners. “Microsoft makes things people pay for. Apple sells billions of consumer goods, and it’s hard to replace them.”

Companies that do not have these traits are criticized in the stock market. Take Meta Platforms Inc. , owner of Facebook (NASDAQ 🙂 that relies on ads. It has lost 58% of its value this year. It’s a picture similar to the Snapchat owner Snap Inc. (NYSE:). and Netflix Inc (NASDAQ:).

As long as real yields in the bond market continue to rise, it’s possible that tech stocks haven’t bottomed, opposing buying in the Nasdaq 100. While the index’s earnings multiplier has fallen a lot, it’s falling from very inflated levels. But stock pickers are finding plenty to buy in technology.

“It’s getting cheaper, but it’s not cheap,” said Alec Young, chief investment strategist at quantitative research firm Mapsignals. “Until the Fed feels able to pause tightening, technology is unlikely to be a leading sector.”

Technical chart for today

The most important technical stories

  • Inc (NASDAQ:). He lost an attempt to exclude top executives including billionaire founder Jeff Bezos and CEO Andy Gacy from having to testify in the Federal Trade Commission investigation.
  • Sometime next year, Tim Cook will appear before the faithful of Apple Inc. It unveils the company’s next major computing platform, a headset that blends virtual and augmented reality.
  • A lawsuit has been filed against Meta Platforms Inc. Allegedly building a confidential solution to warranties launched by Apple Inc. last year to protect iPhone users from tracking their online activity. Meta has acknowledged that the Facebook app monitors browser activity, but has denied that it illegally collects user data.
  • Intel Corp (NASDAQ:). CEO Sandra Rivera has what would have been the most coveted job in the semiconductor industry: head of the company’s highly lucrative data center division. Nowadays, it’s the hardest.
  • Microsoft Corporation (NASDAQ:). President Brad Smith said the company will not label seemingly false social media posts to avoid appearing the company is trying to censor online speech, hinting that the company is taking a different approach than other tech companies in dealing with disinformation.
  • BT Group (LON: Plc) is facing strikes from employees handling ‘999’ calls to emergency services, intensifying their dispute over wages amid a national surge in UK industrial work.
  • Ofcom, the UK’s digital regulator, said it will launch a suite of investigations into digital markets including cloud computing, online messaging and smart devices, marking another step in the scrutiny of the world’s largest technology companies.
  • Kittyhawk, the air taxi company backed by billionaire Google (NASDAQ:) co-founder Larry Page, will be shutting down, marking a setback for an elusive dream of developing flying cars.
  • A prominent state-backed newspaper reported that US intelligence agents took control of parts of China’s telecom network after hacking a government-funded university, issuing Beijing’s latest accusations of US hacking.
  • Former British Prime Minister Boris Johnson was only halfway through introducing several key policies when his government collapsed in a mass resignation. His successor, Liz Truss, now appears poised to ease a series of belated decisions on technology and media.

(Updates to open market)

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