Commenting on today’s trading in which new economy tech stocks dominated the headlines, Gorilla Trades strategist Ken Berman said:
While today’s session was far from convincingly bullish, with small-caps clearly lagging, the major indices still closed near their intraday highs. Relentless buying continues in the tech sector, which was almost solely responsible for today’s gains, and while the Russell 2000’s weakness is a warning sign for bulls, there is still no good reason to turn bearish on domestic stocks.
New economy tech stocks lead markets
The major indices extended their winning streak to four days, with all of them hitting record closing highs following a very choppy session ahead of tomorrow’s government jobs report. The Dow was up 89, or 0.3%, to 29,380, the Nasdaq gained 63, or 0.7%, to 9,572 while the S&P 500 rose by 11, or 0.3%, to 3,346. The number of advancing issues roughly matched the number of decliners on the NYSE, where volume was slightly above average.
The key sectors diverged substantially today, and besides the tech sector, only consumer goods showed notable strength. Materials pulled back following yesterday’s surge, while the other sectors trod water in the quiet environment. On a positive note, the Volatility Index (VIX) declined for the fourth day in a row, confirming the recovery, so even though small-caps were very week, investors still seem to be hungry for risk, despite the still unknown impact of the coronavirus outbreak
The impeachment trial concluded yesterday in the Senate, and President Trump has been acquitted on both articles, in line with expectations. Financial markets barely budged in the wake of the unsurprising decision, but U.S. politics will likely start to matter again for stocks soon, as the presidential election is drawing closer. According to prediction markets, Bernie Sanders is the most likely Democratic nominee to face the POTUS in November, and that could mean a high level of pre-election uncertainty for investors, due to the differences between the two candidate’s economic views.
Key New Economy Tech Stocks
While the busy part of the earnings season is almost over, two key 'new economy' tech stocks, Twitter (TWTR, +16.4%) and Uber (UBER, +0.8%) reported bullish numbers today. The shares of the social media company skyrocketed in early trading, hitting their highest level since October, while the stock of the ride-hailing firm also gained ground in after-hours trading. Both companies had a rough 2019, but their shares have been performing very well, so far, this year, and that’s another positive sign for the tech sector.
While the government jobs report will likely eclipse tomorrow’s other economic releases, investors could still be in for an active overnight session. The Chinese trade balance and German industrial production will both provide important information with regards to the health of the global economy and the struggling manufacturing sector. U.S. non-farm payrolls are expected to increase by 161,000, but in light of yesterday’s blowout ADP payrolls number, a bullish surprise is in the cards. The unemployment rate is forecast to remain stable at 3.5% while hourly earnings are expected to jump by 0.3%.
Thanks to the quick and decisive recovery, the major indices are once again bullish across the board, even the relatively weaker Dow, with the key trend indicators still pointing higher on all time-frames. The large-cap benchmarks remain well above their rising 200-day moving averages of 8,287 for the Nasdaq, 3,020 for the S&P 500, and 27,072 for the Dow, and the indices are also clearly above their steeply rising 50-day moving averages of 3,227 for the S&P 500, 9,014 for the Nasdaq, and 28,525 for the Dow.
While both Apple (AAPL, +1.1%) and Microsoft (MSFT, +2.0%) posted great fourth-quarter earnings, the shares of the software giant have been faring much better, post-earnings. Both stocks are trading well above their respective short- and long-term moving averages, which bodes well for the broader market, but Apple’s exposure to the Chinese market mitigated the effects of its blowout earnings report. Microsoft’s rally, on the other hand, accelerated since its quarterly report, and the firm could soon reclaim the crown of the ‘most valuable U.S. company’ as its market capitalization is quickly approaching Apple’s. Stay tuned!