October 3, 2023

The Nasdaq Composite is now trailing the Dow Jones Industrial Average by 18.3%, its biggest margin since Tuesday’s close since 1991, according to Dow Jones market data, while the blue-chip gauge extended its year-to-date gain. Wipes out the gains of the year.

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The Dow closed in the red for the first time since May 4, after falling more than 300 points during Tuesday’s session. The stock benchmark also ended below its 50-day moving average – a closely watched technical indicator – for the first time since March 30.

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It has been extremely rare over the past 50 years for a tech-heavy index to outperform the Dow by such a wide margin. This is the first time since the Nasdaq’s launch in 1971 that the index has gained more than 17% since May 16, according to Dow Jones Markets, where the Dow was still stuck in the red. Figures.

In the early 1990s, nearly all of the current Nasdaq index leaders were either not yet established, or were still relatively small by market capitalization, as was Apple Inc. In the case of AAPL,
Which went public back in 1980.

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At the time, the Nasdaq was dominated by shares of Costco Wholesale Corp. COST,
Cisco Systems Inc. csco,
And some biotech firms, among others, according to Gene Goldman, CIO of Cetera Financial Group.

Although the S&P 500 and Nasdaq Composite also ended Tuesday’s session in the red, both of these benchmarks are still sitting on strong gains since the start of the year, with the S&P 500 up more than 7% and the Nasdaq up 18%. increased more.

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Investors have invested in a handful of megacap technology stocks, including Apple Inc., Microsoft Corp. MSFT, Inc.
Nvidia Corporation NVDA,
Goldman calls the stocks belonging to the “FANG+” group of stocks. These stocks have offset weakness in other corners of the stock market to account for nearly all of the market’s gains in 2023.

Meanwhile, small-cap, financial services stocks, energy stocks, and healthcare stocks have declined since the start of the year. russell 2000 rout,
The gauge of small-cap stocks is down 1.4% since the start of 2023.

One sign of how concentrated the US stock market has become, Goldman said, is that the 10 largest stocks in the S&P 500 accounted for 87% of the index’s gains during the first quarter.

“The market is not very healthy right now,” he said in a phone interview with Marketwatch. Goldman attributed the increase in interest in megacap technology names to expectations for a Federal Reserve interest rate cut, low Treasury yields, fears of a recession and an “AI craze.”

Shares of Home Depot Inc HD ended Tuesday’s session down 336.46 points, or 1%, at 33,012 due to a selloff.
After the retailer reports its quarterly earnings. Nasdaq Composite Comp,
closed at 12,343.05, down 22.16 points, or 0.2%, on Tuesday, while the S&P 500 SPX,
At 4,109.90, down 26.38 points, or 0.6%.