The technology sector continues being strong amid the coronavirus crisis. The strength in the big tech stocks also resulted in the 1% rally in the Nasdaq Composite, hitting a new record close at 11,264.95 on Aug 20. The tech-heavy index touched its 19th record closing high since early June and its 35th record close so far this year (according to a Reuters’ article). Some strength in other major indices, the Dow Jones Industrial Average and S&P 500, was also observed on the same day as the trading session ended on a positive note.
Notably, Facebook (FB) gained 2.4%, Apple (AAPL) appreciated 2.2%, Amazon (AMZN) rose 1% and Microsoft (MSFT) was up 2.3% on Aug 20, supporting Nasdaq Composite’s record close. Netflix (NFLX) and Alphabet (GOOGL) also supported the tech rally by gaining at least 2% on the same day. Intel’s announcement of an accelerated buyback plan supported its 1.7% gain on the same trading day.
The strength in the technology stocks has also helped overcome the blues from Fed’s minutes from its July 28-29 meeting. The officials at the meeting were visibly worried about the pandemic that poses severe threats to the economic outlook over the medium term,
per a CNBC article. They are also concerned about the adverse impact of the coronavirus outbreak on the economic activities, employment and inflations levels in the near term.
Further, the big tech rally optimism has outweighed the disappointing unemployment data. Per the Labor Department, the U.S. weekly jobless claims came in at 1.106 million for the week ending Aug 15 in comparison to the Dow Jones estimate of 923,000 (according to a CNBC article). The jobless claims have once again crossed the 1 million mark, after sliding below that level for the week ending Aug 8 for the first time since March, per a CNBC article.
Major technology companies’ resilience to the coronavirus crisis is heavily supporting the market momentum. In this regard, Facebook has surged more than 30% year to date, and Amazon (AMZN) has soared more than 78%, with Netflix (NFLX) appreciating more than 50% during the same period. Apple (AAPL) has surged more than 60%, so far in the year.
Overall, the second-quarter earnings season for the technology sector has also been impressive as companies braved the pandemic blues and delivered better results than feared by market participants. The June-end quarter earnings results from 91% of the sector’s market capitalization in the index has been received so far. Of the companies that have reported, 91.7% beat on the bottom line, while 78.3% surpassed revenue estimates. For these companies, earnings were down 3% but revenues were up 3.5% year over year, per the
Earnings Trends report issued on Aug 19. This is a bigger beat percentage than we saw from the same group in the prior quarter.
Also, Apple’s recent entry in the $2-trillion market cap club is further fortifying the technological sector’s footing.
ETFs to Gain
In the current scenario of the rising work-from-home and online shopping trends, increasing digital payments, growing video streaming and soaring video game sales are slowly becoming the “new normal.” With the new trends making way, these major technology stocks are expected to keep gaining on the surging demand for their products and services.Investors seeking to ride the big tech rally could consider the following ETFs:
Vanguard Information Technology ETF ( VGT Quick Quote VGT - Free Report) — up 1.3% on Aug 20
The fund seeks to track the performance of the MSCI US Investable Market Information Technology 25/50 Index. It has an AUM of $35.89 billion and an average daily volume of 1.1 million shares. It charges investors 10 basis points (bps) in annual fees. The fund sports a Zacks ETF Rank #1 (Strong Buy), with a Medium-risk outlook (read:
5 Top-Ranked ETFs to Taste Apple's $2 Trillion Market Cap). Technology Select Sector SPDR Fund ( XLK Quick Quote XLK - Free Report) — up 1.3%
The fund seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the Technology Select Sector Index. It has an AUM of $35.13 billion and an average daily volume of 16.5 million shares. It charges investors 13 bps in annual fees. The fund flaunts a Zacks ETF Rank #1, with a Medium-risk outlook (read:
5 ETF Strategies to Follow Latest Investing Style of Buffett). iShares U.S. Technology ETF ( IYW Quick Quote IYW - Free Report) — up 1.5%
The fund seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the Dow Jones U.S. Technology Capped Index. It has an AUM of $6.17 billion and an average daily volume of around 197,000 shares. It charges investors 42 bps in annual fees. The fund sports a Zacks ETF Rank #1, with a Medium-risk outlook (read:
Ultra-Popular Tech ETFs You Should Not Ignore). Fidelity MSCI Information Technology Index ETF ( FTEC Quick Quote FTEC - Free Report) — up 1.4%
The fund seeks to provide investment returns that correspond, before fees and expenses, generally to the performance of the MSCI USA IMI Information Technology Index. It has an AUM of $4.41 billion and an average daily volume of around 621,000 shares. It charges investors 8 bps in annual fees. The fund also flaunts a Zacks ETF Rank #1, with a Medium-risk outlook.
Investors seeking to ride the Nasdaq bulls could consider the following ETFs. These funds might see massive trading volumes in the days ahead if the afore-mentioned trends continue further.
Invesco QQQ ( QQQ Quick Quote QQQ - Free Report) — up 1.4% on Aug 20
This ETF provides exposure to domestic and international non-financial companies listed on the Nasdaq by tracking the Nasdaq-100 Index. QQQ is one of the largest and most popular ETFs in the large-cap space, with an AUM of $131.35 billion and an average daily volume of 55.2 million shares. It charges investors 20 bps in annual fees. The fund sports a Zacks ETF Rank #1, with a Medium-risk outlook (read:
S&P 500 Hits New Record Highs: Top-Ranked ETF Winners). First Trust NASDAQ-100 Equal Weighted Index Fund ( QQEW Quick Quote QQEW - Free Report) — up 0.4%
This fund provides equal exposure to stocks of the Nasdaq-100 Index. It has amassed $910.8 million in its asset base, while it trades in lower volumes of nearly 108,000 shares a day on average. QQEW carries a Zacks ETF Rank #3 (Hold), with a Medium-risk outlook (read:
Nasdaq Hits Record Mark 11,000: Can ETFs Rally Further?). Fidelity Nasdaq Composite Index Tracking Stock ( ONEQ Quick Quote ONEQ - Free Report) — up 0.8%
This ETF tracks the Nasdaq Composite Index. It has an AUM of $3.03 billion and an average daily volume of around 76,000 shares. The expense ratio comes in at 0.21%. The product carries a Zacks ETF Rank #2 (Buy), with a Medium-risk outlook.
ProShares Ultra QQQ ( QLD Quick Quote QLD - Free Report) — up 2.8%
Investors seeking to make big gains in a short span can bet on QLD. It provides twice the return of the NASDAQ-100 Index’s daily performance and sees 4.1 million shares trading in average daily volume. The fund has an AUM of $3.15 billion, and charges 95 bps in fees and expenses.
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