Shares of IBM (IBM) are taking a hit in afternoon trading, shaving more than 40 points off the Dow Industrial Average. The world’s largest technology-services company reported its lowest quarterly revenue in five years as it grapples with falling demand in hardware and faces challenges in growing markets like China.
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But there is another story behind Big Blue’s slide; over the past several weeks, investors have been shifting from high-beta growth stocks like Twitter (TWTR), Facebook (FB) and Netflix (NFLX) in favor of the perceived safety of more defensive companies in “old tech” – names like Cisco (CSCO), Microsoft (MSFT) and IBM.
But in light of today’s selloff, the question for Wall Street becomes: Will IBM’s intraday slide spread, causing a shift back to risk?
Mike Marrale, head of sales trading at brokerage ITG, doesn’t think so. Marrale says, “IBM is a perennial disappointment” and its pain will likely not spread across the “old tech” sector. “The trade still holds” he says.
Others share Marrale’s optimism for the sector, but warn that more pressure is likely on the way as earnings season rolls on. “IBM’s miss was not unpredictable,” according to Keith Bliss, director of sales and marketing at Cuttone & Company. “IBM makes money and pays a dividend. The trade for IBM is still good.”