The Nasdaq 100 index, including Apple, is just 1.5% below its year high and 4.0% from its record high back in March 2000
The Nasdaq 100 index, dominated by US technology stocks, may set a record high this week, helped by good earnings from Apple expected on Tuesday.
Technology shares led the US stock market’s recovery this week from its worst correction in four years in August, thanks to gains in Alphabet, Amazon and Microsoft, after the three companies reported better-than-expected earnings results.
The Dow Jones industrial average rose 0.9% to 17,646.70, the S&P 500 index recovered another 1.1% to 2,075.15, and the Nasdaq Composite closed the week up 2.27% at 5,031.86.
Shares across Asia, Europe and the Americas all climbed, boosted by Thursday’s message from European Central Bank chief Mario Draghi that he was ready to increase the ECB’s bond buying programme, and by an interest rate cut by China’s central bank.
Factors this coming week that may provide further support for US stocks include a Federal Reserve policy meeting, which is not expected to raise interest rates yet, a report on US third-quarter economic growth, and earnings from Apple.
The Nasdaq 100 index, including Apple, is just 1.5% below its year high and 4.0% from its record high back in March 2000.
Intel and Microsoft have seen their stocks recover more than 30% each since Aug 25, while Amazon and Facebook rose 28% and 23%, respectively.
But the ‘underperformer’ among these companies has been Apple, up only 14.8% from its Aug. 25 close, less than the Nasdaq 100’s 15.1% gain in that time.
In contrast to Microsoft, Facebook, Alphabet and Amazon, Apple shares did not post record or multi-year highs this week, even though it rose 7.2%, the largest weekly gain in a year. On Tuesday, though, Apple is expected to report $51.1bn in revenue, a 21.3% increase compared to the same quarter of last year. Earnings are seen at $1.879 per share.
“The bar has been raised a bit on its earnings report from where it was a week ago. The price action is telling you there’s more optimism built into it,” said Michael James, managing director of equities trading at Wedbush Securities in Los Angeles.
Options market action shows traders expect Apple shares to move roughly 5.0% by the end of next week. The average move for the stock the day after its report in the last eight quarters was 4.4%, up or down.
“Will an above-estimates from Apple and raised guidance help? Sure it will. But we could still get there without that happening,” said James of the possibility of the Nasdaq 100 hitting a record. “The power of the moves in some of these large cap tech stocks has been breathtaking,” he said. Chip makers were also among the top five percentage gainers in the Nasdaq 100 since the index closed at its 2015 low on August 25, with SanDisk topping the list with a 70% jump on the back of a takeover bid from Western Digital.
The overwhelming leadership from established technology companies is a positive for this market move higher, according to Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.
“The last time the Nasdaq 100 was the market leader a lot of it was speculative investments, but these (tech) companies actually return money to shareholders,” she said.
“Tech deserves the leadership; the stock market is rewarding growth.”
While technology stocks have led the market recovery, biotech stocks have been a drag on performance.
The Nasdaq Biotech Index is down 3.5% from its August 25 close, and more than 20% below its year high.
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