Wednesday, 6 June 2018

Markets mixed but tech stocks rally on “strong fundamentals”

Markets were mixed on Tuesday.

In the US, the S&P 500 rose 0.1 percent while the Nasdaq Composite rose 0.4 percent to a second consecutive record close. However, the Dow Jones Industrial Average fell 0.1 percent.

Elsewhere, the Nikkei 225 rose 0.3 percent but the STOXX Europe 600 fell 0.3 percent.

European stocks were dragged down by a 1.2 percent tumble in the FTSE MIB as Giuseppe Conte, Italy’s new prime minister, outlined “radical change” from the country’s new coalition government.

However, in line with the pattern in the US, the STOXX Europe 600 Technology Index jumped 1.5 percent to hit its highest since 2001.

“The fact of the matter is that investors are realizing that the tech sector is the sector they can count on for solid earnings growth,” said Lindsey Bell, investment strategist at CFRA.

Indeed, Goldman Sachs says that there is no bubble in tech stocks as this time is different from previous bubbles.

“Unlike the technology mania of the 1990s, most of this success can be explained by strong fundamentals, revenues and earnings rather than speculation about the future,” strategists Peter Oppenheimer and Guillaume Jaisson wrote in a note. “Given that valuations in aggregate are not very stretched, we do not expect the dominant size and contribution of returns in stock markets to end any time soon.”

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