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NEW YORK, June 15 (Reuters) - The U.S. technology sector fell on Thursday, pulled down by heavyweights including Apple Inc and Alphabet Inc after bearish analyst research gave investors a reason to take profits on the stock market's recent champion sector.
The tech-heavy Nasdaq composite index fell 1.4 percent while The S&P 500 information technology index was down 1.7 percent.
Google's parent Alphabet fell 2.7 percent, making it the second-biggest percentage loser in the S&P technology sector after Canaccord Genuity downgraded its rating of the stock to "hold," from "buy."
The top percentage losers in the technology index were Advanced Micro Devices, down 4.6 percent, and Lam Research, down 2.97 percent.
The downgrade triggered a broader tech selloff, according to Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.
Also, 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 a mega sales cycle diminish for its next smartphone. Apple shares fell 1.9 percent after the report. “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.
“I don’t think this is going to be sustained, simply because if you look at the aggregate valuations … tech is not really any more expensive than the market as a whole. Arguably, you are getting a lot more growth at a pretty reasonable price. And that is what has driven the performance so far, but the reality is that is still the case.”
The selloff came a day after the U.S. Federal Reserve hiked interest rates, as expected, and Fed Chair Janet Yellen said the central bank could start selling bonds on its balance sheet "very soon".
While the tech sector has fallen more than 4 percent since last Thursday, it is still up around 17 percent year-to-date, double the roughly 8-percent rise for the S&P 500. That makes technology vulnerable to a pullback, said Tim Ghriskey, chief investment officer of Solaris Asset Management in New York, who saw no fundamental reason for the move.
"Any type of concern in the market, any reason to raise cash levels, very likely these are the first stocks to go to because of the valuation ... because they've become so dominant in portfolios," said Ghriskey who said the selloff is a short-term blip. (Additional reporting by Lewis Krauskopf and Rodrigo Campos in New York, Noel Randewich in San Francisco; Editing by Nick Zieminski)