Tech Stocks Push Nasdaq Higher
On Monday, the Nasdaq (US-TECH 100), one of Wall Street’s biggest market indices, hit a 2-day gains record. The tech-heavy index’s rise was fueled by a variety of factors including EV-giant Tesla (TSLA) rising yesterday. Here’s what you need to know about this index’s gains.
Nasdaq’s Two-Day Gains
On Friday, January 6th, the Nasdaq witnessed its biggest rally for the new year as an air of optimism swept Wall Street traders and investors. This may have been due to the release of December’s jobs report and an economic survey. Both of these may have indicated that inflation, which has ostensibly been 2022’s headline maker, was easing and the Federal Reserve might have been pulling back on interest rate hikes. In addition, the release of December’s nonfarm payrolls showed that there were more job opportunities in the US compared to market expectations.
In response, many traders and investors seem to have been bullish on some US stocks which pushed the biggest Wall Street indices up to their best level in 2023. Accordingly, on Friday the Nasdaq rose by 2.6% while its peers the S&P 500 (USA 500) and the Dow Jones Industrial Average (USA 30) rose by 2.28% and 2.13% each. As of yesterday, however, the S&P 500 and the Dow Jones Industrial Average are falling slightly.
Moreover, Nasdaq's gains continued to Monday the 9th, skyrocketing by 0.63% but this time for different, and perhaps surprising reasons. This is because, on Monday, key Nasdaq constituent Tesla rose despite having suffered incredible drops of over 70% since January 2022 and up till Friday the 6th.
Tesla’s past flops came against the backdrop of a plethora of factors ranging from inflation to renewed COVID restrictions in China, home to one of Tesla’s biggest factories. Additionally, supply and demand disruptions, higher interest rates that may have turned investors away from Tesla’s shares into more inflation-proof safe-haven assets, and Musk’s controversial and often frowned-upon purchase of Twitter in 2022, may have fueled these losses.
Nonetheless, on Monday, shares of Tesla rose by about 6% possibly due to the fact that the EV giant revealed to potential Model Y buyers in China, that longer waiting times were possible which could have indicated that Tesla cars were in higher demand.
As a result of this surprising turn of events, the Nasdaq was pushed higher. But that’s not all, Tesla also hiked along with other Nasdaq components like NVIDIA (NVDA) and AMD (AMD), both of which gain over 5% yesterday and may have also contributed to the Nasdaq’s rise.(Source:CNBC)
What’s in Store for 2023’s Market?
Despite yesterday’s optimism, the future of 2023’s market is still more opaque than ever as market watchers and analysts seem to be torn between the possibility of a bullish market and the fears of a bearish one. On the one hand, those who have observed Monday’s and Friday’s Wall Street gains may be under the impression that since Monday was the 5th trading day of 2023, and it was generally positive for some Wall Street indices and stocks, then this might indicate that 2023’s market might end up in the black. This logic follows a Wall Street rule that suggests that the first 5 trading days of the new year reflect the rest of the year’s fortunes.
However, it is no secret, the market is known for its volatility and unpredictability. And, as such, that logic might be flawed as one cannot be so certain as to what the future holds. This uncertainty becomes especially prominent in light of the fact that a plethora of factors may be working against the markets this year. For example, while some might think that inflation is easing, so far the Federal Reserve has not indicated similar thinking. In fact, Fed Chair Powell has already revealed in a speech in December 2022, that he believes the Fed will remain hawkish in its rate-hiking policy throughout the year. Some market analysts even posit that the Fed will hike rates even higher than they did in 2022.
Similarly, many market watchers may still be apprehensive about the possibility of a recession this year. And to further ascertain the ambiguity of the situation, the war in Ukraine still seems far from ending. All of these factors and more may counteract the argument suggesting that this year would be bullish. (Source:Market Watch)
Therefore, whether or not these gains in Wall Street will end up pushing the new year’s market up or down is yet to be determined. Traders will have to be patient and keep a keen eye on any market movers to see how this year plays out.