Nasdaq Hits New Highs Thanks To Apple And Microsoft

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Nasdaq Hits New Highs Thanks To Apple And Microsoft
<a href="https://pixabay.com/users/geralt/">geralt</a> / Pixabay

Commenting on Apple and Microsoft earnings pushing Nasdaq higher and today’s trading Gorilla Trades strategist Ken Berman said:

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Q4 2020 hedge fund letters, conferences and more

Apple And Microsoft Push The Nasdaq To New Highs

Following the wild morning session, bulls put up a promising fight this afternoon, shrugging off the global weakness in risk assets. Although the Nasdaq’s new record high is something to cheer about, this morning’s dip was quite the scare for bulls, and the fact that stocks finished near their intraday highs, is a positive sign ahead of this week’s tumultuous days.”

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Cyclical issues struggled throughout the day, but thanks to the afternoon rally, only energy stocks closed with large losses, as materials, financials, and industrials bounced back together with the broader market. That said, the main defensive sectors remained strong in late trading too, with utilities, healthcare stocks, and consumer staples leading the way higher. Tech stocks continued to shine, thanks to Apple’s and Microsoft’s strong showing heloign the Nasdaq to another record closing high.

While only 22% of the members of the S&P 500 have reported earnings, so far, we already got interesting insights into the fourth quarter of corporate America. According to Bank of America (BAC, -1.2%), earnings outpaced expectations by 2%, falling by 8% on a year-on-year basis, meaning that the recovery remained well on track, even without additional fiscal stimulus. On the other hand, the post-earnings moves have been very strange, as earnings surprises had a negative correlation with stock returns, which is something to keep an eye on in the coming weeks.

The Fear Gauge Closes Below Its Intraday High

Today’s violent morning selloff left traders scratching their heads, with some rumors suggesting a hawkish surprise from the Fed could be behind the volatile move. The Volatility Index (VIX, +5.8%) spiked as high as 27 during the plunge, hitting a three-week high, but the “fear gauge” closed well below its intraday high, near the 23 level. Treasury yields hit their lowest levels in almost three weeks as well amid the flight-to-safety, with only long-dated rates falling by the most, and yields closed the day near their lows, which warrants caution for bulls for the rest of the week.

We will have a busy day of economic release ahead of Wednesday’s Fed announcements and we will get indicators of several key sectors. The Richmond Manufacturing Index is expected to edge lower to 18, while the CB consumer confidence number is forecast to come in virtually unchanged at 88.9 The Case-Shiller Housing Price Index will be out as well, but we could still be in for a choppy session, as a lot of participants might take a step back ahead of the crucial tech earnings and the Fed meeting. Stay tuned!

Headlines

  • Stocks finished mixed following a hectic and active session on Wall Street, with bulls gaining the upper hand in afternoon trading
  • Apple (AAPL, +2.8%) and Microsoft (MSFT, +1.6%) spearheaded the rally in the tech sector, which lifted the large-cap benchmarks as well, despite the weakness in cyclicals and small-caps
  • European stocks finished clearly in the red amid the continued COVID pressure, but the U.S. numbers continue to improve
  • California lifted its statewide stay-at-home order while New York is also getting ready to ease some of its restrictions
  • The most-shorted stocks saw increased activity yet again with several issues experiencing wild short squeezes

Market Wrap

Index G/L Current level Year-to- date 50-day 200-day
Dow -37 30,960 1.2% 30,240 27,443
Nasdaq 93 13,654 5.8% 12,600 10,941
S&P 500 14 3,855 2.6% 3,700 3,330
Russell 2000 -5 2,163 9.7% 1,940 1,579

Decliners outnumbered advancing issues by a 3-to-2 ratio on the NYSE today, with 2 stocks hitting new 52-week highs and 138 stocks hitting new 52-week lows, while volume was well above average.

Price Action Gauge ******** (reading for 01/25: 64)

Price action remained mixed today following last week’s wildly divergent sessions, and apart from the bullish tech sector, stocks are still facing slight headwinds.

Oversold/Overbought Gauge ******** (reading for 01/25: 42 Color: green)

The large-cap benchmarks are still slightly overbought according to the most reliable momentum indicators and small-caps remain extremely stretched despite last week’s slight pullback.

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