The Nasdaq Just Hit A Record High As Tech Stocks Book Gains Amid Tepid Market

Topline

Investors are plowing back into booming technology stocks on Monday, lifting the Nasdaq to a new record despite weeks of a lackluster showing against the broader-market indexes.

Key Facts

While the broader-market Dow Jones Industrial Average and S&P 500 ticked down 0.5% and 0.1% late Monday morning, the Nasdaq climbed 0.5%, hitting a new record high of more than 12,500 points despite investors shying away from technology stocks in the weeks since the U.S. election.

The Nasdaq has now surged an eye-popping 36% this year, compared to about 13% each for the Dow and S&P, which hit new highs on Friday.

Heading up gains in the Nasdaq, shares of Tesla were surging 5% to new highs on Monday as investors await the firm’s addition to the S&P 500 on December 21; the electric-carmaker’s stock has skyrocketed 50% since the announcement of its addition to the storied index.

Sirius XM, Netflix and Facebook shares were also propping up the Nasdaq, climbing roughly 3% each as of late Monday morning.

Crucial Quote 

“Even with stocks at record highs, equity valuations remain attractive given record low interest rates,” said Frank Panayotou, a Boston-based managing director at UBS Private Wealth Management, in a note on Monday. “Decisive progress toward a vaccine and a clear U.S. election outcome have materially reduced two significant risks for the markets.”

What To Watch For

This month is on track to be the biggest December for tech IPOs ever, with Airbnb (which will list on the Nasdaq), DoorDash and enterprise software firm C3.ai all looking to raise a larger-than-anticipated $7 billion combined when they go public later this week. Gaming platform Roblox, fintech startup Affirm and discount ecommerce platform Wish are also eyeing IPOs this month, though they’ve yet to be scheduled.

Chief Critic

“The stock market is currently riding purely on technicals and nothing else,” says James McDonald, the CEO of Los Angeles-based Hercules Investments. “If we see a correction in the near-term, it will be due to a temporary exhaustion from the record run-up in stocks since the November 3 elections; potential catalysts for near-term stock market corrections include risk that a vaccine will take longer-than-expected to deploy and its inability to stave off the winter wave of case spikes.”

Key Background

Momentum stocks, and namely those in technology, have dominated the pandemic’s bull market since the steep market correction in March, but, the tide has shifted in the weeks since the U.S. election, as vaccine optimism and the prospects of a favorable regulatory environment in Washington brighten the outlook for value stocks, pushing investors away from the pandemic-loved tech industry and into financials, energy and leisure. Despite its Monday record high, the tech-heavy Nasdaq has underperformed the S&P 500 since President-elect Biden was declared the election’s winner.

Further Reading

Airbnb, DoorDash And Billionaire Tom Siebel’s C3.ai Are Upsizing Their Public Market Debuts, Revving Up Biggest December For IPOs Ever (Forbes)

Dow Jumps 250 Points To Close Above 30,000 Again As Stimulus Talks Progress After Grim Jobs Report (Forbes)

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