Source: Wind
Hong Kong's Wande News Agency reports that US technology stocks and chip stocks performed well in May, driving up the NASDAQ index. However, the rest of the market performed mediocre.
The gap between the rise and fall rate of technology stocks and all other stocks widened in May, reaching a new high since the beginning of 2023. Previously, technology stocks led the market decline in 2022, and investors began to buy back technology stocks in early 2023.
Specifically, the increase in the Nasdaq index in May outperformed the increase of the Dow Jones Industrial Index by 9.3 percentage points, the biggest outperformance since October 2001. At the time, the Nasdaq index soared during a bear market rebound during the bursting of the dot-com bubble, and the market eventually bottomed out a year later.
The S&P 500 index was also driven by technology stocks. The index's performance in May was 3.8 percentage points higher than the blue-chip Dow, the highest level since February 2000.
Although the Nasdaq Composite Index rose 5.8% this month, the Nasdaq 100 performed better because large technology stocks account for a large share. The index rose 7.9% in May.
Why did tech stocks perform so well this month? The launch of ChatGPT at the end of last year sparked an artificial intelligence boom, and it is widely believed that it contributed to the boom in US stocks.
What is certain is that technology stocks have been ahead of the market throughout the year. However, the Dow suffered a severe setback in May, as the market feared that a default on US debt might exacerbate economic problems, and a recession seemed imminent.
The Dow recorded its worst month since February in May, and the S&P 500 index barely rose 0.3% in May, but this was the second time in history and the first time since January 2001. With only three sectors rising, the index rose within a month.
Information technology stocks in the S&P 500 index led the rise by 9.3%, the fifth month in a row. The communications services sector rose 6.2%, while the non-essential consumer goods sector rose 3.9%. The communications services sector is another weighted sector for tech giants such as Facebook's parent company Meta.
Market strategists pointed out that it is rare for a few technology stocks to push the index up sharply, yet most sectors of the market are falling more and more.
Most of the gains in big tech stocks this month are due to seven tech stocks, including Google's parent company Alphabet, as well as Meta, Tesla, Nvidia, Apple, and Microsoft stocks. Steve Sosnick (Steve Sosnick), chief market strategist at Interactive Brokers (Interactive Brokers), said these stocks contributed to the NASDAQ 100 Index's increase of nearly 50% in May.
Sosnick pointed out, “The breadth of market growth has always been poor. This is a story about a handful of stocks and everything else. A few stocks are rising, while others are performing mediocre.”
What is certain is that small stocks linked to artificial intelligence have also seen huge gains. For example, artificial intelligence company C3.AI's stock price rose more than 120% in May.
However, the rise in small-scale stocks has raised concerns among investors. “Only technology stocks are rising; almost all other sectors are falling,” said Mahanad Amma, portfolio manager at Beam Capital Management.
The strong rebound of the Nasdaq index was enough to get some Wall Street skeptics interested in the stock market. In recent weeks, analysts at Bank of America (Bank of America), Citigroup (Citigroup), and Royal Bank of Canada (RBC Capital Markets) have advised customers to invest more money into market corners that have always been in operation.
Investors, including Mahnad Amma, want to know how long the current high valuations of a few tech stocks will last, especially as senior Federal Reserve (Federal Reserve) officials are talking about another rate hike later this year.
Editor/Somer