Uncategorized, Weekly Update

Where the Strength Is

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Published March 9, 2018


While the stock market broadly continues to digest the solid gains of 2017 and investors ponder whether to add to those gains in 2018, we present some areas of the market where strength is being seen. First, our focus index, the Nasdaq 100, traded under the stock symbol QQQ, has shown consistent and clear leadership. The index holds mostly technology and consumer stocks (at over 80% of the index) with healthcare (primarily biotech) another 10% of the index.

Chart 1: Nasdaq 100 index continues to lead the market

Nasdaq 100 index continues to lead the market

Within this powerful index are sectors that have shrugged off February’s market pullback and blasted upward to new highs. The software, networking, and semiconductor sectors have all risen +10% or more since the market correction in early February.

Chart 2: Strength within the Nasdaq

Strength within the Nasdaq

So while much of the commentary on the market these days revolves around tariffs, tax cuts, and interest rates, there are areas of the market seemingly immune to these concerns. Fortunately, they are all in our index of choice, the Nasdaq 100.

Market Update

Concerns about a trade war eased Monday sending stocks to a +1.1% gain as Congressional leaders voiced opposition to steel and aluminum tariffs announced last week, claiming them to be overly broad in scope. Tuesday offered little follow-through though stocks remained in positive territory rising to a +0.3% finish. The departure of the Trump Administration’s Chief Economic Advisor sent stocks down sharply to begin Wednesday’s trade. However, buyers stepped in on reports out of the Administration that the tariffs might be narrowed in application to avoid impacting U.S. allies Canada and Mexico. The broad market closed flat reversing a -1% opening loss, action that sent a very positive sign to investors. The tariff exemption for Canada and Mexico came through Thursday as the tariffs were finalized. A merger in the healthcare space with insurer Cigna (CI) buying pharmacy benefit manager Express Scripts (ESRX) continued the consolidation among healthcare providers. Stocks closed higher by +0.4% on the day. The Nasdaq made it a perfect 5-for-5 week of gains with a strong showing Friday. Stocks opened markedly higher on a blowout monthly employment report with wage growth, a key driver of inflation, remaining in check. Broad-based gains built throughout the day to a +1.5% gain.

A strong week for stocks as they appeared to leave the early February market correction in the rear-view mirror. Five straight days of gains for the market leading Nasdaq 100 (QQQ) left that index at a new all-time high. The S&P 500 (SPY) added +3.64% for the week to recover in full the prior week’s tumble. The Nasdaq 100 (QQQ) busted higher by +4.32% while the small-cap Russell 2000 (IWM) powered upward by +4.31%.

Warm wishes and until next week.