Market snapshot: tech stocks back in focus
Investors switched attention back to the technology sector following a period when small-caps were all the rage. ii's head of markets runs through latest talking points.
23rd July 2024 08:27
by Richard Hunter from interactive investor
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Technology shares regained some of their lustre as investors returned to the sector, somewhat reversing the recent rotation into perceived value stocks.
The Nasdaq added around 1.6%, underpinned by a gain of almost 5% in tech market bellwether NVIDIA Corp (NASDAQ:NVDA), as well as rises in the likes of Meta Platforms Inc Class A (NASDAQ:META).
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Ahead of their quarterly earnings today after the closing bell, Tesla Inc (NASDAQ:TSLA) and Alphabet Inc Class A (NASDAQ:GOOGL) rose by over 5% and 2% respectively. At the same time, however, the gains were a reminder of the high expectations which will accompany the earnings releases and that there is scope for disappointment and therefore volatility should the numbers fall short of expectations.
Elsewhere, the prospect of a divided government following Biden’s withdrawal was being considered by investors, with the associated uncertainty capping some of the wider market gains.
There were also some stock specific stories, such as with CrowdStrike Holdings Inc Class A (NASDAQ:CRWD), which fell a further 13.5% after last week’s 18% decline given its connection to the global tech outage at the end of last week.
In a similar vein, Delta Air Lines Inc (NYSE:DAL) dropped by almost 9% after it was forced to cancel more than 600 flights as it struggled to recover from Friday’s downtime.
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Apart from a raft of earnings this week, the release of GDP and inflation data also carry the capability of unsettling the market. In particular, anything other than the readings which the market expects could throw cold water on the current and almost unanimous opinion that interest rates will be cut in September.
Ahead of what will be an increasingly testing week, the main indices remain comfortably ahead in the year so far, with the Dow Jones having added 7.2%, the S&P500 16.6% and the Nasdaq 20% after yesterday’s relief rally.
Asian markets were mixed once more, with the tech bounce lifting shares in the likes of Japan and Taiwan in particular, although fortunes for the region were clouded once more with the current situation in China.
Investors remain unimpressed by the 0.1% reduction in interest rates, with the consensus being that the decision will do little to revitalise a flagging recovery. In particular, the lack of any meaningful stimulus does little to prop up the ailing property sector, while the outcome of last week’s four-day meeting of Chinese leaders was seen as unambitious in its range of planned policy measures. The weakness of the demand outlook also weighed on commodity prices, while tepid consumer sentiment also drove shares in the sector lower.
The Chinese commodity clouds weighed on the FTSE100 at the open, with weakness in the mining sector exacerbated by two broker downgrades on Anglo American (LSE:AAL). More positively, leading cyber insurer Beazley (LSE:BEZ) rose after suggesting that last week’s tech outage would not affect its guidance outlook.
Elsewhere, Compass Group (LSE:CPG) added almost 4% after reporting increased revenues leading to the group upping its growth estimates, driven by strong gains across all of its geographies. However, these rises could not prevent the premier index falling in early exchanges, reducing its gain to 5.7% in the year to date.
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In contrast, the FTSE250 eked out a small gain at the open, helped along by some strength in the likes of Elementis (LSE:ELM) and SThree (LSE:STEM). The index remains an area of interest to overseas investors, not only given the surprising resilience of the UK economy and the perceived political stability which the election result has brought, but also given the undemanding valuations which have resulted in actual and potential bid activity.
The mid-cap index has now added 7.5% this year after a rocky start, as the UK as an investment destination generally has begun to attract some support.
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