Quick Take: Tech Selloff, Economic Data In Focus

Here’s your “quick take” on this morning’s market…

Yesterday’s sudden selloff in tech, the failure of the “skinny repeal,” disappointing earnings from both Amazon and Starbucks, U.S. GDP, and the surprisingly good economic data across the pond are in focus this morning.

Let’s start with yesterday’s dance to the downside in the technology sector. With tech sporting gains of more than 20% on the year, the VIX once again sitting near all-time lows, and some big names set to report after the bell, the sudden and sharp selloff in tech probably shouldn’t surprise anyone. In this environment, all it takes is a rumor, a “call” by an influential analyst, or just a decent-sized “ignition algo” to get things moving to the downside. And with both AMZN and SBUX missing earnings, we should probably expect more of the same in the sector today. However, it is important to note that for some time now, all dips have been bought – especially in the tech arena. So, unless there is a fundamental change in the outlook for the sector, investors are likely to come back to tech at some point soon… because this is where the growth is strongest in the market.

On the economic front, the official scorecard for economy – aka gross domestic product, or GDP – grew at an annual rate of 2.6% in the second quarter. While a couple tenths below the consensus estimate, the current rate of growth is up sharply from the 1.2% pace seen in Q1.

In Europe, the economic data was surprisingly strong as France’s GDP grew by 0.5% in the last quarter, while Spain’s rose 0.9%.

Finally, stocks are modestly lower in the early going on this summer Friday. Not surprisingly, the decline is being led by tech. However, given the ultra-low VIX levels, it will be interesting to see whether the selling picks up or the dip buyers get busy later in the day.