The S&P 500 has managed to remain within a stone’s throw of its record high

The five largest U.S. technology companies may have lost enough market capitalisation over the past week to buy plane maker Boeing, but the benchmark S&P 500 stock index has managed to remain within a stone’s throw of its record high.

Apple, Alphabet, Microsoft, Amazon and Facebook, the five largest U.S. technology stocks, have seen their combined market capitalisation fall by about $120 billion since last Thursday.

By Thursday the S&P 500 technology index had seen its largest five-day drop in a year.

The slide was again led by sector heavyweights Apple and Alphabet, as investors moved away from what had been the year’s best-performing sector and rotated portfolios into stocks that pay higher dividends amid some signs of U.S. economic weakness.

‘Normal backing off’

“I think it’s a perfectly normal backing off. Tech has done really well. All of sudden everyone wakes up and says, Holy cow, maybe we’re getting ahead of ourselves, and backs off a little bit,” said Brad McMillan, Chief Investment Officer for Commonwealth Financial in Waltham, Massachusetts.

Among technology stocks hit, shares of Google’s parent Alphabet fell 0.8% Thursday after broker Canaccord Genuity downgraded its rating of the stock to “hold” from “buy.”

The broker downgrade triggered a broader technology sector sell-off according to Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.

Apple shares slid 0.6% on Thursday, extending their five-day decline to 6.9%. Barclays analyst Mark Moskowitz wrote that Apple is near the peak valuation levels in its iPhone 6 cycle which “could mean a bumpy ride lower” if the prospects for sales of its next phone disappoint.

Shares of social media company Snap Inc. closed at their initial public offering price of $17 for the first time.

Rotation to value

Some investors were selling technology shares to rotate into other sectors, such as beaten-down energy stocks, said Russ Koesterich, co-portfolio manager of BlackRock’s Global Allocation Fund. It’s more the winners into the losers, rather than a broader move towards safety, he said.

The recent decline notwithstanding, the technology sector remains the best performing so far this year, up 17.4% versus the overall S&P 500 index gain of 8.6%.

Companies including Apple and Google parent Alphabet have seen their stock prices soar in 2017, and their heavy weightings in benchmark stock indexes prompted concerns that overall market gains are too concentrated in a handful of large technology firms.

‘Elixir for a correction’

“We had sensed over the last 4-5 weeks that clients were becoming uncomfortable with the clustering of returns to the S&P 500”, said Julian Emanuel, executive director of U.S. equity and derivatives strategy at UBS Securities. “It felt to us that you had the elixir for a correction in the (technology) sector.”

Concern over the earlier gains in technology stocks this year has been compounded by some recent weak U.S. economic data.

Last month, the U.S. economy added 138,000 jobs, well below the expected gain of 185,000. On Wednesday, the Commerce Department said that retail sales fell 0.3% in May, marking the largest one-month decline since January of last year. Also, the Labor Department said its Consumer Price Index dipped 0.1% last month, the second drop in inflation in three months. In the 12 months through May, the CPI rose 1.9%, the smallest increase since last November.

U.S. Treasury yields tumbled to their lowest since early November on Wednesday on the weak data.

“Tech is one of the losing sectors when the interest rate trade is dominating because rates are falling,” said Brian Nick, chief investment strategist at TIAA Investments, an affiliate of Nuveen, because investors need to look for higher yield in dividend paying stocks.

The resilience in the S&P 500 benchmark has resulted from investors rotating their portfolios into other sectors such as financials and the more defensive sectors like real estate .

“It definitely feels like a rotation that’s gone on for a few days with tech being weakened,” said Edward Perkin, chief equity investment officer at Eaton Vance. “What’s done well in the last few days is the more bond-like plays.”