The Financial Express
So far in 2023, the performance of the Nasdaq 100 as against the S&P 500 is showing a big divergence. While S&P 500 has gained 7% in the first quarter of 2023, Nasdaq 100, the tech-heavy index has raced to record a gain of 20.5%. This also marks the re-entry of the Nasdaq 100 index into the bull market territory, from its December lows.
A bigger rally in the tech stocks came in March as it closed 7% higher as against the 1.5% gain posted by S&P 500 last month.
What marks the divergence is the rally in technology stocks since the beginning of 2023. Two factors may have led to fueling the tech rally this year. First, talk of inflation peaking that may lead the US Fed to be less aggressive in raising rates surfaced, and secondly, the emergence of the banking crisis that made funds move away from bank stocks, into tech stocks.
The strength in technology stocks can also be seen as gauged by the performance of the Nasdaq 100 against the Nasdaq Composite. It is because there is a big difference between Nasdaq 100 and Nasdaq Composite indices.
The Nasdaq 100 index is a large-cap growth index that includes 100 of the best domestic and international non-financial businesses based on market capitalization, while the Nasdaq Composite Index includes all Nasdaq domestic and international stocks listed on the Nasdaq Stock Market. There is no exposure to any financial company in the Nasdaq 100, which is a significant distinction between it and the Nasdaq Composite index.
From January 1 till March 31, 2023, some of the highest gaining stocks were –
NVIDIA Corporation 90%
Meta Platforms, Inc. 76%
Tesla, Inc. 68%
Warner Bros. Discovery, Inc. 59%
Align Technology, Inc. 58%
Advanced Micro Devices, Inc. 51%
Salesforce, Inc. 50%
NVIDIA Corporation was up by 90% while Salesforce gained by over 50% YTD.
Some of the headwinds for the tech sector bull market to run longer include – the absence of a broad-based rally in the Nasdaq 100 index, inflation remaining sticky, earnings outlook and US Fed official’s hawkish speeches in April. There’s no FOMC meeting this month and markets will have to wait till May first week to hear Powell’s take on rate action.
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