Technology gives and technology takes off.
Shares ended 2% in a holiday week of choppy action that ended on Thursday. A late recovery in technology stocks put the market in the green for the week. The trade ended early in the observance of Good Friday.
Thursday was also the end of the first quarter of activity, and perhaps the best investors can say that it's over. The quarterly 1.2% decline in the overall market is not particularly bad for historical events, but it has suffered a nine-quarter profit series. More importantly, investor sentiment also rose sharply.
While equities continued to hit new highs in January, the party fired by President Donald Trump's election ended in February, interrupted by rising interest rates and worries over possible tariff struggles, and the surprise weakness in equities created by regulatory concerns Technology companies that have been market leaders for years.
Facebook (Ticker: FB), for example, has fallen 1
Last week, the Dow Jones Industrial Average rose 569 points, or 2.4%, to 24,103, though it fell 2.5% in the first quarter. The Standard & Poor's 500 Index rose 2% to 2640.87 but fell 1.2% in the quarter. The Nasdaq Composite rose 1% last week to 7063.44, but posted a quarterly loss of 2.3%. All sectors were in the red for the quarter, with the exception of tech and consumer discretionary.
"We are in a structurally different environment" since the market high, says Michael O & Rourke, senior market strategist at JonesTrading. The volatility since the end of the month will continue and market leadership has narrowed, not a very good sign, he says – adding that the tech backlash is not waning.
Everyone owns technology, adds Steve Massocca, a director of Wedbush, to securities and as investors leave the sector, this could cause problems for both individual stocks and the broader market. Last week, many of the issues investors are worried about have moved to the sidelines, but they have not been resolved, he says. It is likely that at least in the second quarter profits will be harder to achieve compared to the last 18 months.
An unusual background for the weak quarter is that volatility and poor trading activity have even occurred as growth in corporate earnings estimates has accelerated. According to FactSet, the S & P 500 Index consensus estimate per share increased 7% to $ 157.77 in the quarter compared to $ 147.24 at the year-end. This is the largest increase in the annual EPS estimate in the first quarter since FactSet began in 1996.
For this reason – and the prospect of overall good economic growth – Kate Warne, investment strategist at Edward Jones, remains bullish. The second quarter may be down and technology concerns are a legitimate problem, but the broader underlying fundamentals of the market are improving, she notes. Their view requires that tech stocks be flat or slightly lower in the worst case because the sector is such a large part of the market indexes.
April brings spring and some hope. It is generally a bullish month. For the past 100 years, April has been the third strongest month for the Dow, with an average increase of 1.3% and positive returns in two-thirds of the time, according to the Bespoke Investment Group.
Investors can not arrive early enough.
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