Tuesday, 23 May 2017

Markets mixed as tech sector raises concerns

Markets were mixed on Monday.

The S&P 500 rose 0.5 percent, the Nikkei 225 rose 0.4 percent but the STOXX Europe 600 fell 0.1 percent.

Despite the rebound in the US, some analysts remain concerned about further weakness.

Michael Stanes, investment director at Heartwood Investment Management, wrote in a note on Monday that “we are in the latter part of the market cycle and sentiment is likely to remain vulnerable to pressure points as we move through the year”.

Matt Maley, equity strategist at Miller Tabak, thinks that tech stocks will be key.

Maley wrote that “if they do not play catch-up as we move through the week, it will raise the odds that we'll see more weakness in the stock market before long”.

On the other hand, others think that investors may be putting too much faith in the tech sector.

The Nasdaq Internet index, with a P/E of 61, “is approaching P/E levels that are as spicy as they were in prior ‘big tops’ in stock markets, and at a time where policy is turning less favorable”, BofA wrote in a note to clients.

Morgan Stanley wrote of “concerns that index-level moves have been driven by tech to a large and perhaps unsustainable degree”.

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