Nasdaq back in favour after falling 11% since recent high!
On Tuesday, 9th March 2021, the Nasdaq climbed nearly 4% to enjoy its best day since November 2020. Investors poured back into popular growth stocks after a recent pullback. Will the risk on revival continue?
Tesla surged 20% after falling as much as 33% over recent weeks. Apple gained more than 4% and Amazon rallied 3.8%.
‘Risky’ or ‘relative’ as investors buy the dip?
Investors in general climbed back on board the tech stock merry-go-round backing risk assets again. Treasuries added to gains after auction.
Snapshot
- Financial firms and energy producers, recent winners, were the only two S&P 500 sectors that retreated.
- Tesla jumped 20% – its best day in a year – but still off highs.
- Zoom gained 10%.
- Gold gained more than 2% – still off highs though.
- Peloton gained 14%.
- 10-year yield fell below 1.55% – also off recent highs.
- Bitcoin moved above $54,000 – off its high.
Vaccinations and stimulus
As U.S. vaccinations continue to roll out and Democrats move ever closer to injecting a further $1.9 trillion into the U.S. economy, the rotation from growth to value reversed violently – for a day at least.
Debt, inflation and interest rates will likely be stoked by such a massive stimulus injection and bond yields will climb…eventually.
The rising prospects for economic growth are real now and have been reshaping market order for the past two months as the latest U.S. stimulus moves ever closer and daily vaccinations gain momentum. Why wouldn’t markets continue an upward trend as we re-open global economies?
To buy or not to buy?
Dip buyers were out in their droves on Tuesday 9th March 2021 – and targeted areas recently deemed too expensive. Buying the dip is a tactic that’s played out for years, every retreat gets bought – but it has been extreme of late. The risers among the tech companies were among the big momentum stocks of last year.
Pullback
The S&P 500 hasn’t had a pullback of 5% since November. The Nasdaq touched correction territory in recent days after falling 11% since its recent high. The S&P 500 advanced 1.4 per cent to 3875.
Be careful of these markets – more pullback to come?
Be careful trading these markets – they will take out both shorts and longs. Tesla is one such stock to highlight – the huge volatility we have recently witnessed in such a large stock is going to be important. The sheer number of ETF’s with exposure to Tesla an by extension Bitcoin – is vast and troublesome.
When is a tech company not a tech company?
It leads me on to a question about Tesla’s identity. Is it primarily viewed as a tech company, or a car manufacturer, or a bitcoin investor, or all three?
When Ford ramps up it’s electric car production for instance, will this make it a tech stock market influencer too, or will it remain a car maker?
Tesla heavily influences tech stock market movements. Tesla is not a constituent of Nasdaq index – it is a constituent of the S&P 500 and yet it has the ability to influence tech stocks.
Beware the volatility!