Macroeconomic Factors Affecting Technology Stocks in 2015




In this series, we’ll analyze the macroeconomic factors affecting YTD (year-to-date) performance of the semiconductor subsectors in the Technology Select Sector SPDR ETF (XLK) that have outperformed peer companies in terms of shareholder returns. As of September 25, 2015, XLK generated YTD returns of -2.28% to close at $39.81.

We’ll analyze factors affecting the performances of Nvidia (NVDA), Broadcom (BRCM), Skyworks (SWKS), Avago (AVGO), and Altera (ALTR).

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Subsector performance

In the above chart, we can see that the Technology, Hardware, and Storage subsector performed the worst, generating YTD returns of -26.21%. The Semiconductor Equipment and Integrated Telecommunications subsectors followed, generating -24.87% and -17.06%, respectively.

Subsectors that outperformed XLK include Specialized REITs, Internet Software and Services, and Home Entertainment Software, with YTD returns of 25.93%, 10.49%, and 49.04%, respectively.

In terms of individual stocks, Electronic Arts (EA) generated maximum YTD returns of 49%, followed by Total System Services and Altera at 36.37% and 36.19%, respectively, whereas Yahoo!, Micron (MU), and SanDisk (SNDK) generated negative YTD returns of -39.14%, -55.73%, and -46.22%, respectively.

Choppy trading since 2Q15

Since the 2Q15 earnings season, the technology sector has seen choppy stock trading. ETFs have also seen a fall in prices. Compared to 2Q14, the technology sector is expected to see lower earnings on a year-over-year basis. While this sector saw a 6.2% growth in earnings in 1Q15, the sector is expected to fall by 4.9% in 2Q15.

Other macroeconomic factors have affected technology stocks. The Greek debt crisis, the fall in the Chinese stock markets, and global growth issues have made cyclical technology stocks less attractive to investors and analysts. Semiconductor stocks have had to bear the brunt of these factors, thereby seeing a major dip in share prices.


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