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Tech stocks have rebounded in 2019

But bulls haven’t returned.

Technology stocks have seen solid gains since tumbling to a 15-month low late last month, but investors aren’t convinced that that low represents a bottom for the sector, which has been volatile amid questions over growth and valuation.

The S&P 500 information technology index is up 10% since the close of trading on December 24, when it ended at its lowest since September 2017.

Among notable gainers over the same period, Nvidia has risen 17%, Advanced Micro Devices has climbed 22% and Oracle is up 13%. The moves have been even more sizeable when it comes to some of the market’s most closely watched Internet stocks. Netflix is up more than 40% over that period, while has rallied 22% and Facebook has risen 16%. All of these, however, remain decisively below record levels.

“People were shocked at how bad fourth-quarter performance was in tech. We saw a lot of panic selling that I think was based on how quickly the stocks were going down, as opposed to fundamentals getting worse,” said Walter Price, senior portfolio manager at Allianz Global Investors, who oversees the $1.4 billion AllianzGI Technology Fund.

“I’m hopeful that panic low will hold, but it’s a little early to know,” he told Bloomberg in a phone interview. “The signs are encouraging, but it really depends on whether we see a trade deal with China. That’s a big unknown, as China is a significant source of either demand or supply for tech companies, as we saw with Apple.”

In a notable exception to the broad uptrend, Apple is up just 3.5% since December 24, pressured after it cut its revenue outlook for the first time in almost two decades, citing weak iPhone demand in China.

The outlook underlined the risks that continue to be seen around the sector, which remains more than 16% below record levels.

The partial recovery in prices has not been matched by a rebound in sentiment. According to Bloomberg data, exchange-traded funds that track the technology sector have generally seen outflows even as the stocks have risen. More than $2 billion was pulled from the category in the week ended Dec. 28, followed by an additional $1.4 billion in outflows the subsequent week. Roughly $1.1 billion has been redeemed from tech-sector ETFs thus far in January.

According to BofAML’s most recent “Flow Show” report, “few are bullish tech & financials,” even with the rebound in prices.

Since January 3, when the firm’s “Bull & Bear Indicator” indicated a buy signal for stocks, investors bought $6.2 billion worth of equity funds. However, they sold $600 million of tech funds over the same period.

© 2019 Bloomberg L.P

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