Nasdaq 100 Soars Back Above 50-SMA

Sure enough, tech stocks have roared back with a vengeance, sending the Nasdaq 100 back above its 50-day simple moving average (SMA) once more, after enduring a bruising selloff last week.

On Monday, the tech-heavy index surged 2.89% to register its best day since 4 November, the day after the US presidential elections. This tech benchmark also fared better than the S&P 500 (+2.38%) and the Dow Jones index (+1.95%) yesterday, as investors restored the 2021 gains for the Nasdaq 100. The information technology sector was also the best-performing sector on the S&P 500 yesterday, powering this benchmark for US stocks to its best day since June!

And fans of Big Tech also seized on the opportunity to pump these megacaps higher:

  • Facebook: +2.83%
  • Apple: +5.39%
  • Amazon: +1.72%
  • Alphabet: +2.36%
  • Tesla: +6.36%

Why the tech comeback?

With tech stocks bearing the brunt of the stocks selloff last week to post its worst week since October, Monday’s price action suggests that the “buy the dip” mantra is still alive and kicking.

Also, investors appear to have shrugged off the threat of rising Treasury yields, at least for now. This is set to be a risk that market participants will have to be mindful off, until there is certainty as to when the Fed signals that they’ll be easing up on their asset-purchasing programme.

“Despite the recent market volatility, the fundamentally bullish case for stocks remains intact.”

The US economic recovery that’s further enabled by more fiscal stimulus and the continued spread of the Covid-19 vaccine should spell more upside for equities, as long as the Fed doesn’t signal a premature letting up of its policy support.

Tech still expected to lag other sectors

Still, it’s important to note that investors had been rotating away from the more expensive tech stocks and increased their exposure to other sectors that stand to benefit from more injections of US fiscal stimulus. Such a shift becomes more obvious when comparing the Nasdaq 100’s year-to-date gain of 3.06%, compared to the S&P 500’s advance of 3.88% for the same period.

Should the reflation trade keep up, the tech sector is expected to continue relinquishing its leadership in propelling US equities higher, a role it had performed to great effect since the height of the pandemic.

“It’s high time for value and cyclical stocks to lead the pack and ride on the tailwinds of the economic recovery.”

How are US tech stocks set to perform on Tuesday?

With 10-year Treasury yields appearing to have stabilized just above the 1.40% level, stock market bulls are set to take advantage of the relative calm. After all, the VIX index, which is also know as Wall Street’s “fear” gauge, has moderated closer towards the 20 mark on Monday, having notably breached the 30 line in the latter parts of last week.

“At the time of writing, the Nasdaq 100 futures are relatively steady, which hints at a slight pause for tech stocks when US markets open today; perhaps a breather after yesterday’s runup.”

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