By Wallace Witkowski, MarketWatch
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.