Every 'FAANG' stock is now in a bear market as Apple shares topple in rolling sell-off

Published Thu, May 12 20229:42 AM EDTUpdated Thu, May 12 20224:15 PM EDT

Jesse Pound @/in/jesse-pound @jesserpound

The market sell-off has finally captured the last Big Tech holdout, and now investors will wait to see if that was the last straw before a rebound. Apple dropped 5.2% on Wednesday and closed 19.9% below its all-time intraday high. It fell another 2.7% on Thursday, bringing the tech stalwart into an official bear market, sitting 22% from its prior high. It now joins its so-called "FAANG" brethren — Facebook-parent Meta Platforms , Amazon , Netflix and Google-parent Alphabet — in a bear market, along with software giant Microsoft . Source: FactSet Apple's decline marks a major milestone in this market pullback. The weakness in speculative areas of the market, such as unprofitable tech and cryptocurrencies, began late last year. Many of the shares of money-losing companies have fallen by 50% or more. However, Apple is an extremely profitable company that earned more than $100 billion in GAAP net income over the past four quarters and has a mountain of cash at its disposal. Its bear market status can't be a simple story about higher interest rates making far-off earnings less attractive. With the possible exception of Netflix, which saw subscribers decline last quarter among an increasingly competitive streaming video market, the drop of the FAANG names and healthy companies in other industries signals a new phase of the market sell-off. "These stocks are so important. They were the last ones to go," Ritholtz Wealth Management CEO Josh Brown said on Wednesday's " Closing Bell: Overtime ." " It doesn't mean that anything is wrong with these companies. It means that something is substantially wrong with the market." The bear market status has made those stocks potentially big winners whenever the market rebounds, according to Wall Street analysts. Outside of Netflix, each of the Big Tech stocks listed above has a buy rating from more than half of Wall Street analysts. And, with the exception of Amazon, all of the stocks are trading at forward price-to-earnings ratios well below their December levels. Additionally, Apple succumbing to the selling pressure could be a sign that investors are finally capitulating and that a market bottom could be on the horizon , however distantly. "Our assumption is that the AAPL selloff will continue, not because we know anything about this quarter's iPhone shipments or services revenue, but because we believe that once investors start selling best of breed names they are rarely done in one day," wrote Nick Colas, co-founder of DataTrek Research. "The only good news – and barely so – is that this is the sign we've been waiting for in terms of the beginning of a final flush for US/global equities." The S & P 500 is now teetering near a bear market as well, settling down 18.3% from its record closing high on Wednesday. Brown said that the market may need a full washout day, that takes out the energy and defensive stocks that have kept the S & P 500 afloat, to find a bottom. "I really feel that, listening to the old timers, the guys who have seen this many times like Art Cashin, that need for a true, true washout day, circuit breakers and everything, might be just what the doctor ordered," Brown said. However, he did point out that there were some signs that the market's decline was nearing an end, such as a recent rally for U.S. Treasuries. "Is this the end? I don't know. I think there's a lot less risk starting to buy here than there was two weeks ago," Brown said.

Customers walk past an Apple logo inside an Apple store at Grand Central Station in New York.

Lucas Jackson | Reuters

The market sell-off has finally captured the last Big Tech holdout, and now investors will wait to see if that was the last straw before a rebound.