The Nasdaq (^IXIC) has surged out of correction territory and reached a 15-month high, contributing nearly $2 trillion to the market within a short time frame. Remarkably, almost two-thirds of the $2 trillion increase originated from the Magnificent Seven tech stocks: Alphabet (GOOG, GOOGL), Amazon (AMZN), Apple (AAPL), Meta (META), Microsoft (MSFT), Nvidia (NVDA), and Tesla (TSLA). Despite a weak outlook for their third-quarter earnings, companies like Apple and Meta have reported substantial profits.Thank you for reading this post, don't forget to subscribe!
Josh Lipton and Julie Hyman from Yahoo Finance present the latest updates on this development and discuss the potential outlook for the tech sector in the upcoming year.
To gain further insights from experts and stay updated on the latest market activity, watch the full episode of Yahoo Finance Live by clicking here.
Discussing the recent rally in big tech, which has contributed nearly $2 trillion to the NASDAQ 100’s market cap since late October, Josh Lipton comments on Wall Street’s belief that the rally will persist until the year-end. This is in spite of the weak third-quarter earnings outlooks reported by companies like Apple and Meta.
Julie, there is a broader perspective here. Investor confidence is on the rise due to favorable inflation reports and the perception that the Fed will maintain a passive stance. Amidst this, investors have shown interest in investing in companies such as Microsoft and Apple.
We recently featured Dr. Ed Yardeni, a renowned economist and strategist, on our show. In addition to discussing the year-end investment opportunities, he emphasized the significant role of technology as a key area for investment through 2024.
Julie Hyman: The noteworthy aspect is when we observed the pivot in the market and the broadened rally following the CPI report earlier this week. It indicates that the strong performance is not limited to technology but extends to small caps as well. However, the recent surge in stocks has predominantly been driven by big tech, particularly the Magnificent Seven, which accounts for a significant portion of the $2 trillion increase.
Continuing with the insights, Julie presents a chart depicting the surge in stocks, particularly the New York Fang+ index, which primarily comprises the Magnificent Seven. This surge has prevented the NASDAQ from entering a correction phase. The chart also illustrates the outperformance of the largest cap techs compared to the S&P 500 and demonstrates the widespread nature of the rally. The significant impact of the biggest large cap techs on the market is clearly evident.
Josh Lipton: Despite the market dynamics, certain themes continue to prevail. For instance, the decline in interest rates has been favorable for big techs. Furthermore, the growing interest in AI remains a prominent factor, with investors banking on its potential to enhance the financial performance of selected companies such as Microsoft and NVIDIA, which is set to report next week.
Julie Hyman: Echoing these sentiments is Dan Ives, who has consistently emphasized the potential for a technology rally later this year, which is now observed to be in effect
Josh Lipton: Indeed, Ives has been a proponent of this view for some time.
Julie Hyman: Absolutely.
Josh Lipton: Yes.