Traders are getting worried about the ‘place to be’ in the market (QQQ)

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Tech companies are expected to have the best earnings season in the S&P 500 this quarter.

Investors aren’t taking any chances.

They’re snapping up options that protect against a drop in the tech-heavy Nasdaq 100 index, pushing the cost of those hedges to the highest it’s been since December.

It’s a huge swing in sentiment in just seven weeks, when investors were the most unhedged on tech stocks since late 2014.

So what’s changed? For one, first-quarter earnings growth forecasts have surged, with analysts now calling for 16% expansion, up from 10% at the start of March, according to a Bloomberg survey.

To investors, that degree of optimism is potentially dangerous should results come in below forecasts, which has driven investors to seek protection.

“There’s heightened sensitivity going into this earnings season,” Steve Sosnick, an equity risk manager at Timber Hill, the market-making unit of Greenwich, Connecticut-based Interactive Brokers Group, said in a phone interview. “If investors are going in with high expectations, it’s that much easier to disappoint them. You’re starting to see undercurrents of hedging, if not outright selling.”

That investors would want to protect gains is not altogether surprising, considering the Nasdaq 100’s 13% post-election surge. However, with the index all but flat over the past month, it’s clear caution has been seeping into the tech sector for weeks.

That wariness also stems from lowered expectations around the effect of Donald Trump’s proposed tax break for companies bringing overseas money back into the US, a concern rekindled by recent comments from Treasury Secretary Steven Mnuchin that reform measures won’t happen by August. Companies in the tech industry have outsized overseas cash holdings relative to broader market, positioning them to benefit more from a lower repatriation rate that may not come for a while.

“Considering that the market’s rise post-election was based on tax reform, it makes sense that people are buying some protection as expectations are lowered,” said Sosnick.

However, selling out of tech shares completely at this point would be a rash decision, at least if Wall Street strategists are to be believed.

The sector is the “correct place to be” as long as bond yields remain low, BAML chief investment strategist Michael Hartnett wrote in an April 14 client note. The yield on the US 10-year Treasury fell to a more than five month low on Tuesday.

Other firms share a similar view. Goldman Sachs chief equity strategist David Kostin has an overweight rating on tech, while Oppenheimer chief investment strategist John Stoltzfus recommends the sector receive the biggest allocation out of all S&P 500 sectors.

Still, investors can’t be too safe heading into a period of event risk like earnings season, which is why latent skepticism is manifesting itself in hedges, said Sosnick.

They’re paying a 9.2 percentage point premium to protect against a 10% decline in the PowerShares QQQ Trust Series ETF — which tracks the Nasdaq 100 — relative to bets on a 10% increase. The measure, known as skew, climbed to 9.3% on Tuesday, the highest since December 2, according to data compiled by Bloomberg.

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Facebook and Twitter don’t polarize people’s political views, new study finds

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It’s tempting to embrace the idea that social media platforms insulate people from conflicting political views.

But it turns out not to be true.

According to a working paper from the National Bureau of Economic Research, the widely-held belief that social media sites like Facebook and Twitter create “filter bubbles” that reinforce people’s political views is mostly made up.

“Blaming the Internet for the political climate today doesn’t have much empirical support,” Levi Boxell, a Stanford economics researcher and the lead author of the study, tells Business Insider.

Boxell says he and his colleagues wanted to figure out how much the internet actually polarizes people’s political views. The team studied data from the American National Election Studies, a collection of surveys issued to American voters to gauge their attitudes and behaviors on a variety of issues.

The team’s analyzed the data from 1996 to 2012, focusing on nine different measures. Those including how strongly linked someone’s political party was to their ideological affiliation, how much time they spent online, and where they most often engaged in political discussion.

Overall, the researchers found that the people who are most likely to use the internet — those between the ages of 18 and 39 — were least likely to see their political views get polarized during the six years studied. The opposite was true for people 65 and older: Their views were the most likely to get entrenched during that time period, typically through other media, such as TV and radio.

Previous research, however, has found that online and offline media to wield about the same level of influence on people’s beliefs. And the real-life social networks people keep — friends, family, and “political discussants,” as Boxell puts it— are even stronger influences.

All that is to say people can easily form filter bubbles without social media, Boxell says.

So if you want to be as informed about a topic as possible, you should still listen to people who don’t agree with you.

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Facebook is testing high-speed wireless internet service in California (FB)

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After testing drones designed to beam internet service to Sub-Saharan Africa, Facebook is setting its sights closer to home.

The social network announced on Wednesday that it’s testing high-speed gigabit wireless internet service with the city of San Jose, California.

The test is the first of its kind for Facebook, and while residents of San Jose won’t have access to the network during this test, Facebook said it intends to make the technology available to densely-populated cities with poor internet service in the future.

Facebook is additionally planning more test flights in 2017 for Aquila, its internet-beaming drone that crashed during its first test flight last year. The company also said that it’s testing a small helicopter that will be capable of offering internet access for up to several months at a time during emergencies and times of crisis.

This story is developing…

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