AJ Fabino, Senior Editor, Stock Trader Network
A semiconductor selloff sent traders looking Tuesday morning for the stocks keeping QQQ from following the chip sector lower. Stock Trader Network’s Dennis Dick found the answer in a corner of the Nasdaq-100 that rarely commands the same attention as Nvidia or AMD—its non-tech holdings.
The Invesco QQQ Trust (QQQ) fell as much as 2.1% after the opening bell, then recovered most of that decline and was down roughly 0.5% around 12:50 p.m. ET. Semiconductor stocks remained under considerably more pressure, with the VanEck Semiconductor ETF (SMH) down about 3% and the PHLX Semiconductor Index (SOX) falling nearly 6% at its morning low. The Dow, meanwhile, gained more than 600 points.
The differences were even more pronounced among individual stocks, with Micron Technology (MU) losing more than 8%, Advanced Micro Devices (AMD) falling nearly 7%, Intel (INTC) declining about 5% and SanDisk (SNDK) dropping more than 13%. At the same time, T-Mobile (TMUS) and Amgen (AMGN) gained nearly 4%, Gilead Sciences (GILD) added more than 2%, and Costco (COST), PepsiCo (PEP) and Walmart (WMT) rose between 1% and 2%.
DDD began working through those offsets during Tuesday’s PreMarket Prep. Traders still commonly use the Nasdaq as shorthand for tech, even though the index has accumulated a sizable collection of companies whose earnings have little to do with chips, cloud computing or artificial intelligence.
Nasdaq’s membership rules help explain why. The Nasdaq-100 contains 100 of the largest nonfinancial companies listed on the exchange, selected under a modified market-capitalization weighting system. That leaves tech with an outsize influence while still making room for retailers, drugmakers, utilities, railroads, restaurant operators, telecom providers and hotel companies.
The discussion produced a new Stock Trader Network watchlist built around those non-tech parts of QQQ:
PEP, TMUS, COST, BKNG, GILD, HON, CMCSA, ADP, ORLY, SBUX, CTAS, MDLZ, MAR, CSX, MNST, AEP, FAST, ROST, BKR, AZN, EXC, KDP, KHC, CHTR, WMT and AMGN.
Most of those holdings receive little attention when Nvidia, Apple and the other large tech companies are rising. Their influence becomes easier to see on a morning like Tuesday, when weakness in the index’s most crowded trades runs into buying across several unrelated industries.
The math is not one-for-one, though. QQQ is heavily concentrated in its largest growth companies, so gains in Pepsi or American Electric Power will not individually cancel a decline in Micron or AMD. Support spread across two dozen holdings, however, can absorb a meaningful amount of selling and explain why the ETF performs better than the technology headlines would suggest.
Long rallies rarely keep the same leaders from start to finish. They tend to last through periods when investors take money from stocks that have already run and put it to work in companies with different valuations, earnings cycles and economic sensitivities. DDD’s read was that Tuesday’s trading showed one of those handoffs taking place inside QQQ itself.
That makes the watchlist more useful as a measure of market participation than as a collection of trade ideas. Tracking it alongside semiconductors offers a clearer view of whether QQQ’s strength is supported by a wider group of companies or remains dependent on a rebound in the same technology stocks that previously carried it.
While the chip rout dominated Tuesday morning’s headlines, DDD’s watchlist showed which companies were helping hold QQQ together underneath it.
