The biggest stocks were the biggest losers in chaotic first quarter

U.S. stocks underperformed emerging markets stocks, which was the only one among the three major regions — U.S., developed markets ex-U.S. and EM — to turn in positive performance as of Thursday, but even emerging markets barely eked out a gain, up about one half of 1 percent. Developed markets outside the United States were down roughly 1.5 percent, while the S&P was sitting on a loss above 2 percent, though the market had rebounded as of midday Thursday.

Facebook and other tech stocks may seem to be getting the most negative attention, but it’s not just Facebook or tech stocks specifically that have caused the largest-stock loser effect. Microsoft (MSFT) and Apple (AAPL) are 25 percent of the Select Sector SPDR Technology (XLK), which tracks the S&P 500 tech sector. Alphabet is another 10 percent; Facebook is only 6 percent.

Year-to-date Apple and Google are both down, but Microsoft has outperformed. And year-to-date, XLK has still eked out a gain, which makes it one of the few sector winners among S&P 500 stocks.

“Despite the sell-off, tech is still one of the only two sectors with positive returns this year, after leading the market last year with a 38 percent return,” said Neena Mishra, director of ETF research at Zacks Investment Research. She noted that many narrowly focused niche tech ETFs have done better than the broader tech ETFs this year. (Examples include XWEB, XITK, PNQI, FDN and IGV.)

FDN, the First Trust Dow Jones Internet Fund, is fourth in flows to U.S. stock funds from ETF investors this year, with about $1 billion in new assets, behind Vanguard’s S&P 500 (VOO), the iShares Edge MSCI USA Momentum Factor ETF (MTUM) and Vanguard’s Total Stock Market ETF (VTI). The Principal mega-cap ETF was No. 5 in flows.

MTUM and FDN are the only ones among the top five U.S. stock ETFs in flows that registered positive performance as of Thursday, according to Morningstar data.

Consumer discretionary (XLY) was another winner among sectors in Q1, up between 1 percent and 2 percent, helped by a healthy weighting to Netflix (No. 6 holding by ETF weight) and Amazon (No. 1 holding in the ETF). Netflix was among the best-performing S&P 500 stocks in the first quarter, but the recent volatility in tech stocks and fears it may give up its market leadership due to valuation concerns, and President Donald Trump’s fixation on Amazon in particular, make the winning bet on this sector tenuous.

Health care (XLV) registered as a “winner” in the first quarter, down a little less than the S&P 500 as a whole, but being a winner showed that the market really fell apart after a strong start in January — health-care stocks were down only about 2 percent.

The biggest losers were energy (XLE), consumer staples (XLP) and materials (XLB), all down more than 7 percent amid riding bond yields — which makes dividend stock yields less attractive and overrode other factors, like stronger oil prices and a weak dollar.

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