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“In Technology, whatever can be done will be done” – Andy Grove

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While the market initially reacted positively to Amazon’s (AMZN) earnings last night, the stock reversed course and is trading down over 2% this morning.  That weakness has overflowed to the major indices as well as the S&P 500 and Nasdaq are both indicated to open lower as treasury yields are lower.  It’s been a busy morning of economic data and while there were no major surprises, the majority of reports were more biased to the upside like the Employment Cost Index, Personal Income, and Personal Spending which all exceeded forecasts by 0.1 percentage points.  Meanwhile, PCE was inline with forecasts at both the headline and core levels.

It’s been a rough month for semiconductor stocks. After outperforming the S&P 500 by nine percentage points in January, four percentage points in February, and nearly six percentage points in March, the Philadelphia Semiconductor Index (SOX) is down nearly 9% in April compared to a gain of 0.6% for the S&P 500. There’s still a day left of trading in the month, but at the current levels, the SOX is underperforming the S&P 500 by the widest margin since May 2019, and before that, you need to go all the way back to November 2008 to find another month where the SOX lagged the S&P 500 by a larger amount.

As shown in the chart below, there have only been eight other months in the last 20 years that the SOX has underperformed the S&P 500 by 7.5 percentage points or more.  While this month’s underperformance comes after three months of steady outperformance, for a sector that has led the market in recent years, the underperformance of semis cannot be ignored.

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