The heavyweight tech and growth stocks that drove Wall Street higher in recent years are again fuelling a surge that has taken the Nasdaq from a brutal selloff to an intraday record high in just 11 weeks, as investors look beyond the pandemic.
- Nasdaq has risen some 43% since March
- The continued surge comes as investors and analysts acknowledge the faster than expected economic recovery from the COVID-19 lockdowns
- However, the road to recovery could be long as many businesses are not expected to survive
The Nasdaq’s 43% rise since late March puts the tech-heavy index far ahead of the broader S&P 500, highlighting investors’ willingness to bet that tech and communication companies will emerge stronger from the pandemic.
The Nasdaq index on Friday closed 2.06% higher on the day after earlier surpassing the previous intraday record high hit on the 19th of February, just before fears of the coronavirus ended Wall Street’s 11-year bull market. The Nasdaq on Friday ended just short of its record high closing level, also set Feb 19.
The Nasdaq’s intraday high on Friday came after the monthly payrolls report surprised investors with the addition of 2.5 million jobs in May, providing the clearest evidence yet that the US economy is headed for a quicker-than-anticipated recovery from lockdowns designed to contain the coronavirus outbreak. Even so, the road to recovery could be long and the jobless rate, at 13.3% last month, remains high, and many businesses are not expected to survive.
Many investors in recent months have bet that massive corporations with robust balance sheets will build on competitive advantages and grab market share from smaller rivals struggling to survive the global health crisis.
Microsoft, Apple and Alphabet have outperformed most stocks within the Nasdaq, while Amazon and Facebook have set record highs in recent weeks. Their strong performance has increased the group’s concentration within the Nasdaq, extending a trend seen in recent years.
Since February 19th, the end of the previous Nasdaq bull market, Amazon’s stock market value has increased by over $150 billion, far more than any other US company, as investors bet that shopping will move further online and that Amazon’s cloud computing business will grow quickly. Alphabet, still down 6% since Feb. 19, has lost about $25 billion, more than any other US company, according to Refinitiv data. Microsoft and Apple are Wall Street’s most valuable companies.
Due to the cloudy economic outlook, many companies in recent months have withdrawn or declined to provide earnings guidance, making it difficult for investors to value stocks based on future earnings. Still, the Nasdaq currently trades at a trailing price/earnings multiple of 31, a level last seen in 2004 in the wake of the bursting of the dot-com bubble.
The team at Platform Executive hope you have enjoyed the ‘Tech drives Nasdaq index to all-time high as signs of recovery emerge‘ article. Automatic translation from English to a growing list of languages via Google AI Cloud Translation. Initial reporting via our official content partners at Thomson Reuters. Reporting by Noel Randewich. Editing by Ira Iosebashvili and Leslie Adler.