Amazon Slumps Nearly 14% in the Last 2 Days: ETFs in Focus – October 30, 2018

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Technology shares tumbled on Oct 29 after news that Trump administration was set to press its trade war with China. The United States is all set to impose tariffs targeting the rest of the imports from China, amounting to $257 billion provided that trade talks do not lead to a resolution of any kind. Nasdaq closed trading 1.6% down. The index is down 5.6% in the last five days and 12.3% in the past month (as on Oct 29) (see: all the Large-cap ETFs here).

The tech sell-off has affected Amazon (AMZN Free Report) , which released its Q3 results on Oct 25, reported mixed Q3 results, beating the estimates for earnings and lagging on revenues. The company is said to be focusing more on long-term goals rather just earning short-term gains despite the turmoil surrounding the industry (read: Amazon Beats on Q3 Earnings, Guides Weak: ETFs to Watch).

Amazon lost 6.3% on Oct 29 and has fallen nearly 14% in the past two-days — marking the biggest two-day dip in the past 56 months. The stock has dipped nearly 25% since its record high in September. It took 18 years for the company to reach $250 billion valuation and a similar value has been lost in the past eight weeks. On Sep 4, Amazon joined Apple in the trillion-dollar club. Despite the latest fall, the company trades at 82 times its forecast earnings for 2018.

The information technology sector has dipped nearly 11% this month. The sector is on course for its worst month since October 2008. Each of the FANG stocks are down roughly 14-24% this month, leading to nearly $200 billion loss of market cap in the last two trading sessions.

Revenue growth for Q2 was at 39% year over year which fell 10 percentage points for the third quarter. The company gave fourth-quarter revenue guidance in the range of $66.5 billion and $72.5 billion, well-below consensus of $73.79 billion. The fourth quarter is the biggest and most important sales period for Amazon because of the holidays.

Amazon blossomed in recent times as it offered investors a chance to ride on booming e-commerce, digital advertising and cloud-computing markets with global economy performing steadily. However, slower-than-expected revenue growth amid weak forecasts for the upcoming holiday season has lead to the recent fall in the stock of Amazon as investors are wary of whether the company would be able to sustain a high rate of growth (read: Is Cash the Best Asset Right Now? ETFs in Focus).

ETFs to Tap

Recent news surrounding the company indicates that Amazonheavy ETFs could face some negative pricing action. The following ETFs provide a double-digit allocation to the stock:

Consumer Discretionary Select Sector SPDR Fund (XLY Free Report) —24.4% weight

It tracks the Consumer Discretionary Select Sector Index. It comprises 80 holdings. AUM is $15.87 billion and expense ratio charged is 0.13%.

ProShares Online Retail ETF (ONLN Free Report) —23.3% weight

 It tracks the Consumer Discretionary Select Sector Index. There are 22 holdings in the fund pool. AUM is $22.6 million and expense ratio charged is 0.58%.

Vanguard Consumer Discretionary ETF (VCR Free Report) —23.1% weight

It tracks the MSCI US Investable Market Consumer Discretionary 25/50 Index. There are 326 holdings in the fund pool. AUM is $2.9 billion and expense ratio is 0.10%.

VanEck Vectors Retail ETF (RTH Free Report) —20.3% weight

It tracks the MVIS US Listed Retail 25 Index comprising 25 holdings. AUM is $117.4 million and expense ratio is 0.35%.

Fidelity MSCI Consumer Discretionary Index ETF (FDIS Free Report) —19.3% weight

It tracks the MSCI USA IMI Consumer Discretionary Index. There are 338 holdings in the fund pool. AUM is $694.5 million and expense ratio is 0.08%.

iShares U.S. Consumer Services ETF (IYC Free Report) —19.8% weight

It tracks the Dow Jones U.S. Consumer Services Index. There are 169 holdings in the fund pool. AUM is $924.2 million and expense ratio is 0.43%.

iShares Global Consumer Discretionary ETF (RXI Free Report) —18.5% weight

It tracks the S&P Global Consumer Discretionary Index. It comprises 147 holdings. AUM is $282.9 million ad expense ratio is 0.47%.

Invesco QQQ (QQQ Free Report) —10.2% weight

The fund tracks the Nasdaq-100 index and comprises 103 holdings. AUM is $67.9 billion and expense ratio is 0.20%.

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