SAN FRANCISCO – The technology sector appears to be doing just fine on Wall Street a week after it lost two of its highest-profile components to a newly christened communication services group.
The S&P 500 technology index has gained 1.3% since the start of last Monday, when Facebook Inc. and Google parent Alphabet Inc. – half of the FANG group of hyper-growth stocks that propelled Wall Street higher in recent years – were pushed out of technology and into the telecom sector, renamed‚ “communication services.”
During that short period of time, the technology index outperformed communication services and consumer discretionary, the third sector affected by the largest ever overhaul of the Global Industry Classification Standard (GICS).
Bank of America Merrill Lynch recommended on Monday that investors be overweight technology and underweight communication services and consumer discretionary.
“Old Tech represents a lot of what we like: net cash and healthy balance sheets, free cash flow generation, leverage to unit volume sales growth and low earnings risk,” bank strategist Savita Subramanian wrote in a report.
Following the changes to GICS, Cisco Systems Inc. and Intel Corp. join Visa Inc., Microsoft Corp. and Apple Inc. as the tech sector’s largest five components.