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Microsoft and Alphabet Have Best Week in Years Amid Bank Turmoil!

Return of the tech stocks!

This month, a $634 billion rally in the Nasdaq 100’s top three mega-cap names has almost powered the tech-heavy gauge into a new bull market. Yet the nature of the rebound may signal that it doesn’t have much further to run.

Tweet on tech mega-cap stocks 

Bloomberg chart on tech stock rally

The gains in Apple Inc., Alphabet Inc., and Microsoft Corp. have been fueled by their so-called safe haven status, as fear of contagion in the banking industry pushed investors toward megacaps’ cash-rich balance sheets and durable revenue streams.

Three other index heavyweights — Nvidia Corp, Meta Platforms Inc., and Tesla Inc. are by far the biggest gainers in March.

Yet while big tech might offer some safety in turbulent times, it isn’t without risks. Valuations are elevated, the earnings outlook looks clouded, while a critical factor behind the rebound, falling bond yields could prove short-lived.

“Right now you’re paying a big premium to be in the sector at a time of above-average risk, which suggests your return potential from here doesn’t look great,” said Keith Lerner, co-chief investment officer at Truist Advisory Services. “We don’t love tech, but while other options don’t look great either, tech has gotten so crowded that we could see a real reversal if emotions change.”

This month’s 6.2% rally means the Nasdaq 100 is now up 19.7% from its December closing low, near the 20% threshold that represents a new bull market. A 17% year-to-date gain compares with one of 3.4% for the S&P 500.


Source: Bloomberg
Image: Nasdaq