The stock market experienced strong gains in the first quarter of 2017 courtesy of positive economic data, rate hike prospects, earnings growth and bullish forecasts along with buoyancy over the Trump administration’s policy initiatives. The Dow and the S&P 500 gained 4.6% and 5.5%, respectively.

Notably, the tech sector performed the best, with the Technology Select Sector SPDR ETF (XLK Quick QuoteXLK - Free Report) logging a gain of 10.2% over the first three months of the year. Optimism surrounding the sector’s performance has grown by leaps and bounds thanks to Trump’s policy initiatives. Brushing aside concerns pertaining to overvaluation, the sector perked up on strong prospects, upbeat earnings and improving economic conditions.

In fact, semiconductor stocks emerged as the biggest winners from the sector given rising demand for chips across a range of industries.
    
Consequently, the tech-heavy index, Nasdaq, outperformed and recorded a gain of 10% in the first quarter. Notably, the index scaled 4.3%, 3.8% and 1.5%, respectively, in the first three months of the year. In fact, Q1 marked the index’s best quarterly performance since the end of 2013.

The Quarter from a Broader View

Apart from the significant rally in tech stocks, a slew of bullish data on consumer confidence, job numbers, GDP and corporate profits also drove the index’s performance.

However, oil stocks were the sole losers over the period, weighed down by oversupply and apprehensions over the sustainability of the OPEC led output cut agreement.

Meanwhile, after posting five back-to-back declines, the third quarter of 2016 was the first to move into the positive earnings growth territory. The fourth quarter of 2016 kept the momentum alive and broke all records with growth reaching the highest level in two years. Notably, total earnings grew 7% in the quarter while total revenues rose 4.7%. We note that the overall outlook for Q1 is also encouraging with earnings and revenues likely to rise 6.5% and 6.4%, respectively.

Naturally, the Zacks classified Computer and Technology sector performed well with earnings and revenues growing 9.2% and 5.6% respectively in Q4. Moreover, for Q1, both earnings and revenues are expected to grow 11% and 6.7%, respectively.

It is to be noted that prospects of lower taxes, reduced regulations, and updated trade policies under Donald Trump’s presidency were the major factors behind the first-quarter rally. All these moves were deemed as pro-growth.

However, the rally slowed in March, after Trump's presidency took a hit following the collapse of the Republican-led bill which would have replaced Obamacare. While, the Dow and S&P 500 declined in March, the Nasdaq continued to reflect strength by posting a slight increase.

5 Star Performers from the Nasdaq in Q1

Below are five stocks that aided the outperformance of the Nasdaq index in the first three months of 2017. Moreover, these stocks have excellent prospects and are well-positioned for the future as well:

Boston, MA-based Vertex Pharmaceuticals Inc. (VRTX Quick QuoteVRTX - Free Report) is focused on the discovery, development and commercialization of small molecule drugs targeting serious diseases. This Zacks Rank #1 (Strong Buy) company’s main area of focus is cystic fibrosis (CF). The two CF drugs in its portfolio – Kalydeco & Orkambi – have blockbuster potential and efforts to get these approved for additional indications are encouraging. You can see the complete list of today’s Zacks #1 Rank stocks here.

Notably, in the first three months of 2017, the stock returned over 48%. Moreover, analysts are quite bullish on the stock. This led to 100% and 4.2% increase in the Zacks Consensus Estimate for current quarter and current year earnings, over the past 60 days. Additionally, for full-year 2017, sales growth is pegged at 16.6% while EPS is likely to grow a momentous 558%.

San Jose, CA-based, Adobe Systems Inc. (ADBE Quick QuoteADBE - Free Report) is one of the largest software companies in the world. We remain optimistic about this Zacks Rank #2 (Buy) company’s market position, compelling product lines, continued innovation and strong balance sheet. Solid adoption of Creative Cloud and Adobe marketing cloud also augers well.

Interestingly, in the first three months of 2017, the stock surged more than 26%. Moreover, the company saw an upward trend in earnings estimate revision. Over the past 60 days, the Zacks Consensus Estimate for current quarter and current year earnings increased 4.1% and 4.9%, respectively. Further, for fiscal 2017, sales growth is pegged at 22.4% while EPS is expected to grow a healthy 27.9%.

Broadcom Ltd. (AVGO Quick QuoteAVGO - Free Report) is a designer, developer and supplier of analog and digital semiconductor connectivity solutions. Broadcom is expected to enjoy synergistic benefits from the merger with Avago, which will continue to drive profitability. This Zacks Rank #1 company’s wide array of products and a well-diversified customer base also bode well.

Notably, the stock surged nearly 24% in the first three months of 2017. Upward estimate revisions for 2016 and 2017 earnings add to the optimism. The Zacks Consensus Estimate for current quarter and current year earnings has scaled 11.1% and 6.8%, respectively, over the last 60 days. Moreover, for fiscal 2016, sales and EPS are projected to grow a respective 28% and 32%.

Applied Materials, Inc. (AMAT Quick QuoteAMAT - Free Report) is one of the world’s largest suppliers of fabrication equipment to semiconductor, LCD and solar PV cell manufacturers. This Zacks Rank #1 company is in a great position to grow sustainably and profitably based on its strong pipeline of enabling technologies, supported by expanding opportunities on the semiconductor, service and display fronts.

Notably, the stock returned around 24% in the first three months of 2017. Also, upward estimate revisions reinstate hope on the stock’s prospects. The Zacks Consensus Estimate for current quarter and current year earnings increased 22.6% and 9.9%, respectively, over the last 60 days. What’s more, for fiscal 2017, sales growth is pegged at 21.9% while EPS is likely to grow a solid 51.4%.

Microchip Technology Inc. (MCHP Quick QuoteMCHP - Free Report) develops and manufactures specialized semiconductor products for a wide variety of embedded control applications. The company's expanding product portfolio and growing analog business enables it to consistently perform well.

Notably, this Zacks Rank #1 company returned 15% in the first three months of 2017. Moreover, the company has been seeing an uptrend in earnings estimate revision. Notably, over the past 60 days, the Zacks Consensus Estimate for current quarter and current year earnings moved up 19.3% and 13.2%, respectively. Further, for fiscal 2017, sales growth is poised at 59.7% while EPS is expected to grow 46.1%.

Going Ahead

With the U.S. bull market completing its eighth successive annual run in March, Nasdaq remains poised for continued growth. Though the index lost some stem last month, overall fundamentals remain positive, especially considering the upbeat earnings outlook for Q1. Moreover, the rally in technology stocks is also likely to continue, which should further propel the Nasdaq index higher.

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