Dec. 2, 2019, 4:56 p.m. EST

Cloud-software stocks weather harsh start to December amid tech-spending concerns

Wall Street rookies like Slack, Zoom Video and CrowdStrike among those hit in selloff as final month of the year begins

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By Wallace Witkowski, MarketWatch


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Previously sunny skies turned dark for cloud-software stocks Monday.

Cloud-based enterprise stocks led the software sector lower during a broader selloff Monday, as businesses reportedly wait for signs of more economic certainty before parting with their IT bucks.

The First Trust Cloud Computing ETF /zigman2/quotes/205187458/lastsale SKYY -0.23% , which had been down as much as 3%, finished down 2.1% compared with the iShares Expanded Tech-Software Sector ETF /zigman2/quotes/201870252/lastsale IGV +0.47% , which traded 1.9% lower on Monday. That was against the backdrop of a 0.9% retreat in the S&P 500 index /zigman2/quotes/210599714/realtime SPX +2.28%  and a 1.1% fall in the tech-heavy Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +1.72% .

Software stocks have been a popular target this year, but recent concerns about businesses’ willingness to spend on tech in the year ahead could be convincing investors to back off for now. Large technology providers such as Cisco Systems Inc. /zigman2/quotes/209509471/lastsale CSCO +4.82%  have been sounding alarms about their customers’ willingness to spend the past few months, and that could presage a slowdown in software spending ahead.

“I believe [Software as a Service] stocks are getting hit because of the softness in enterprise spend,” said Patrick Moorhead, principal analyst at Moor Insights & Strategy, in emailed comments. “Enterprises are being very cautious with the IT spend right now given economic uncertainties, Brexit and China.”

Companies that went public this year were some of the hardest hit. Slack Technologies Inc. /zigman2/quotes/212180539/lastsale WORK -5.79%  dropped as much as 8.3%, to a session low of $20.92, but recovered to a loss of 1.4% by the close. Zoom Video Communications /zigman2/quotes/211319643/lastsale ZM -11.00%  finished down 7.5%, while security-software company CrowdStrike Holdings Inc. /zigman2/quotes/212513426/lastsale CRWD +3.87%  declined 5.2%.

Shares of Atlassian Corp. /zigman2/quotes/207177221/lastsale TEAM -3.76%  fell 4.9%, while shares of Okta Inc. /zigman2/quotes/210420951/lastsale OKTA -2.99%  dropped 6% and PagerDuty Inc. /zigman2/quotes/210571191/lastsale PD -0.94%  shares were down 5.1%. Twilio Inc. /zigman2/quotes/205796518/lastsale TWLO -1.90%  fell 5.8% and Benefitfocus Inc. /zigman2/quotes/204534086/lastsale BNFT +0.12%  shares fell 6.4%.

Workday Inc. /zigman2/quotes/201157610/lastsale WDAY -3.10%  shares fell 4% and ServiceNow Inc. /zigman2/quotes/202729495/lastsale NOW -5.15%  finished down 2%, having been down nearly 5% earlier in the session.

For the year, the First Trust Cloud Computing ETF is up 23%, compared with a 31% gain in the iShares Expanded Tech-Software Sector ETF, and a 29% rise in the Nasdaq.

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US : U.S.: Nasdaq
$ 52.05
-0.12 -0.23%
Volume: 449,394
April 2, 2020 3:59p
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/zigman2/quotes/201870252/lastsale
US : U.S.: Cboe BZX
$ 201.25
+0.94 +0.47%
Volume: 737,849
April 2, 2020 4:10p
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/zigman2/quotes/210599714/realtime
US : S&P US
2,526.90
+56.40 +2.28%
Volume: 3.87B
April 2, 2020 5:11p
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/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
7,487.31
+126.73 +1.72%
Volume: 3.17M
April 2, 2020 5:16p
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/zigman2/quotes/209509471/lastsale
US : U.S.: Nasdaq
$ 39.80
+1.83 +4.82%
Volume: 28.18M
April 2, 2020 4:00p
P/E Ratio
15.57
Dividend Yield
3.62%
Market Cap
$162.55 billion
Rev. per Employee
$684,933
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/zigman2/quotes/212180539/lastsale
US : U.S.: NYSE
$ 24.26
-1.49 -5.79%
Volume: 11.09M
April 2, 2020 6:30p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$12.52 billion
Rev. per Employee
N/A
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/zigman2/quotes/211319643/lastsale
US : U.S.: Nasdaq
$ 121.93
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Volume: 27.30M
April 2, 2020 4:00p
P/E Ratio
1,502
Dividend Yield
N/A
Market Cap
$38.22 billion
Rev. per Employee
N/A
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/zigman2/quotes/212513426/lastsale
US : U.S.: Nasdaq
$ 56.69
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Volume: 3.06M
April 2, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$11.64 billion
Rev. per Employee
N/A
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/zigman2/quotes/207177221/lastsale
US : U.S.: Nasdaq
$ 129.01
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April 2, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$32.90 billion
Rev. per Employee
$391,879
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/zigman2/quotes/210420951/lastsale
US : U.S.: Nasdaq
$ 115.99
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April 2, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$14.68 billion
Rev. per Employee
$255,768
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/zigman2/quotes/210571191/lastsale
US : U.S.: NYSE
$ 15.89
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April 2, 2020 6:30p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$1.25 billion
Rev. per Employee
N/A
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/zigman2/quotes/205796518/lastsale
US : U.S.: NYSE
$ 83.32
-1.61 -1.90%
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P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$11.87 billion
Rev. per Employee
$451,435
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/zigman2/quotes/204534086/lastsale
US : U.S.: Nasdaq
$ 8.23
+0.01 +0.12%
Volume: 372,408
April 2, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$269.77 million
Rev. per Employee
$178,428
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/zigman2/quotes/201157610/lastsale
US : U.S.: Nasdaq
$ 122.37
-3.91 -3.10%
Volume: 3.03M
April 2, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$29.30 billion
Rev. per Employee
$269,447
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/zigman2/quotes/202729495/lastsale
US : U.S.: NYSE
$ 259.00
-14.07 -5.15%
Volume: 4.42M
April 2, 2020 6:30p
P/E Ratio
81.87
Dividend Yield
N/A
Market Cap
$51.83 billion
Rev. per Employee
$319,943
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Wallace Witkowski is a MarketWatch news editor in San Francisco. Follow him on Twitter @wmwitkowski.

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