Big gains by some big tech names have brought the Nasdaq 100 index on the verge of its first multiyear closing high since July. It would be the first major U.S. index to do so, with the others all lagging their own highs by at least 1.5%.
The question for investors: What does that mean going forward for the broad market? The conventional wisdom would say it’s good for the Nasdaq 100 to lead, but very often these old bromides are not always true when scrutinized.
While the Nasdaq 100 is at a new high, the S&P 500 is roughly 2% below its high, the Dow Jones Industrial Average is 3% shy and the Russell 2000 is lagging by 9%. So what tends to happen next when the Nasdaq 100 hits a new three-year high, but the other three indexes are all at least 1% below their own highs?
Jason Goepfert at Sundial Capital has run the data, and discovered that returns for the broad market were shaky in the very short term, with twice as much of a chance of seeing a down day next than an up day. Returns improved quickly after that and by two weeks later the S&P 500 was twice as likely to show a positive return as negative one. Three months later, 18 out of 23 occurrences were positive, with 13 gains of more than 3% versus two losses of more than 3%.
The best performers in the next three months were the Nasdaq 100 and Russell 2000, both of which outperformed the S&P 500. The best of all was the Nasdaq 100, whose average returns handily beat every other index. Overall, Goepfert concludes that the Conventional Wisdom this time … is right on. Nasdaq leadership is a plus.
|Can big-name Nasdaq stocks endure?|
The two charts above show that the elite of the Nasdaq 100 since 2012 have been the large Web-oriented stocks like the ones our new Internet of Things (IoT) portfolio in the Tech Trend Trader service focuses on, and those have been the power behind the recent outperformance as well. Facebook (FB) is not widely recognized as an IoT name, but it will turn out to be one of the biggest players.
That’s why I will continue to focus on technology for the profits of tomorrow, in the short term and also for the upcoming years.
Do you have the same faith in technology stocks as I do? Which ones do you favor? Have any of the big names run their course, soon to be replaced by new technology? I’d love to get your views. Click here to share them with your fellow readers.
Many of the comments rolling in referred to the GOP debate, with many readers agreeing that the moderators were off-base with their questions.
Reader Fred 151 said: “Agreed. They should refuse to answer these inane questions in the future and talk about whatever they want.”
Reader Robert said: “The debates are only money makers for the media and television networks, and the moderators are the biggest jokers of the century. Yes, the American people have finally woken up and now realize just what a scam they all are thanks to the likes of The Donald. Jeb Bush needs to pick up his marbles and go home. He should have taken his mother’s advice which was, America don’t need another Bush! Take Marco with you when you leave and that recent fiasco in the House of Representatives with the New Speaker is another total joke.”
Reader Raymond added: “The commentators of CNBC asking the questions of the Republicans vying for office, has to be one of the ALL-TIME worst series of questions that I have ever witnessed.”
Join the conversation on the debate, the Internet of Things or any other issue by clicking here.
The oil-price slump has hit Chevron Corp. (CVX), well at least it hit thousands of Chevron workers. While the company reported $2.04 billion in third-quarter profits, the oil giant also announced that it was laying off about 7,000 workers (11% of the workforce) and slashing capital expenditure because of the slump in energy prices. The quarterly profits actually did take a big hit from lower energy prices, although they beat Wall Street expectations. Profit for the quarter was 64% from the year-ago period, when the nation’s second-largest oil company (behind Exxon Mobil) had a profit of $5.6 billion. Revenue tumbled 37% to $34.32 billion. Chevron said its average price for a barrel of crude oil and natural gas liquids plummeted 51.7% from $87 a year ago to $42.
The back and forth on a potential Fed rate hike went back again today, with data showing that U.S. consumer spending in September posted its smallest gain in eight months and personal income rose only marginally. “It will be difficult for the Fed to justify a rate hike at a time when income, consumption and inflation are trending lower, leaving a December rate hike less likely than prior to the data,” Jay Morelock, an economist at FTN Financial, told Reuters.
Another day, another merger to report. This one, if it goes through, would bring the maker of Viagra and Botox together. Pfizer Inc., (PFE) the No. 1 drugmaker in the U.S., and Botox maker Allergan PLC (AGN) said they were in friendly talks for a deal that would create a pharmaceutical giant. But it also raised concerns that a combined company could establish its base in Ireland to take advantage of that country’s lower tax rates, and that in turn sounded political alarm bells. Pfizer is based in New York, while Allergan is located in Dublin. The companies said no agreement has been reached and that talks are still ongoing.
President Obama plans to send dozens of special ops forces to northern Syria to advise fighters opposing ISIS forces, a reversal of earlier policies and a step he had hoped to avoid as he tried to keep the U.S. from getting more deeply involved in a Middle East war. The number of forces would be fewer than 50, an administration official said, according to Reuters. Obama has come under pressure to increase U.S. efforts to halt ISIS moves in Syria.
What about oil companies that are making billions of dollars cutting back on employees? Is it only natural that corporate chiefs should look to cut costs and earn even more for shareholders if that is possible? Is Pfizer looking to do a deal to move its tax home to Ireland? Should more be done to stop such “inversion” moves? Jump to the website with this link to join the conversation.
The Money and Markets team