Major US technology and internet stocks soared on Thursday, adding hundreds of billions of dollars in market value, after the latest data on inflation was welcomed as a positive sign about where Federal Reserve policy could be headed.
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Inflation cooled in October by more than what was forecast, suggesting that one of the biggest headwinds facing tech could be easing. It could also give the Federal Reserve room to slow down its pace of interest rate hikes, easing another strain on the multiple of so-called growth stocks.
“Investors have been wanting to bid prices higher on any catalyst, and this is as good as any,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott. “The magnitude of the move seems a bit excessive, since I think it’s too early to say we’ve been given the all-clear signal for tech, but the market has been extremely desirous of anything that could elicit a more dovish response from the Federal Reserve.”
The Nasdaq 100 Index soared as much as 5.9% on Thursday, its biggest intraday percentage gain since April 2020. The move added more than $700 billion in market capitalization. In another tailwind to the day’s rally, the yield on the US 10-year Treasury fell to 3.85%, down from a recent peak above 4.2%.
Higher rates and yields are taxing on stocks that are priced on their prospects far out in the future, and such factors have contributed to the Nasdaq 100 falling 30% this year.
The day’s rally in tech was broad-based, with an index of semiconductor stocks up 6.3% and software surging 7.8%. Companies that have been particularly beaten down this year climbed the most; a Goldman Sachs basket of the most expensive software stocks climbed 12%, while a Goldman basket for unprofitable tech surged 13%.
Read the full article here by Ryan Vlastelica, Advisor Perspectives.
