Even as the S&P 500 suffered its fourth successive daily loss on Jun 26, tech stocks surged higher. The Nasdaq emerged as the only broad benchmark to finish in the green, after Micron Technology (MU - Free Report) fueled a surge in semiconductor stocks.
The surge in tech stocks is notable since it occurred on a day when investors expressed their skepticism over a trade deal, leading to a decline in the broader indexes. In fact, the Technology Select Sector SPDR Fund (XLK) is the leading performer among the S&P 500’s 11 sectors year to date. It maintains a similar dominance over the last three months.
Despite the fallout of the trade war and global economic sluggishness, prospects of technology stocks have not been dimmed this year. This is why it makes sense to add them to your portfolio.
Big Tech Remains Big Wall Street Story
On Wednesday, the Nasadaq Composite index gained 0.3% on a surge in semiconductor stocks. The VanEck Vectors Semiconductor ETF (SMH) advanced nearly 3% after shares of Micron surged 13.3%, following the release of better-than-expected guidance. Shares of NVIDIA (NVDA - Free Report) gained 5.1% while shares of ON Semiconductor (ON - Free Report) increased by 4.2%.
The day’s events underlined the continuing dominance of tech stocks this year. In fact, SMH is up 24.4% year to date. The broader Vanguard Information Technology Index Fund ETF (VGT) has gained 25.6% over the same period.
Moreover, the Technology Select Sector SPDR Fund (XLK) has gained 25.6% year to date, easily outperforming the S&P 500’s 16.2% increase. XLK is the leading sectoral performer over this period as well as over the last three months, during which it has gained 6.7%, nearly twice the S&P 500’s 3.5% increase.
Trade Deal to Boost Tech’s Prospects
Tech seems to be surging despite uncertainty over a U.S.-China trade deal. But an agreement between the two rivals will only boost the sector higher. Most tech behemoths conduct a large amount of business overseas, leading to a massive buildup in overseas revenues. If the Trump administration successfully defuses tensions with China, they stand to gain substantially.
Comments made on Jun 26 by Treasury Secretary Steven Mnuchin suggest that a near-term deal is still a possibility. Speaking to CNBC in Bahrain, Mnuchin said: “We were about 90% of the way there (with a deal) and I think there’s a path to complete this.” Mnuchin thinks significant progress can be made by presidents Trump and Xi at the upcoming meeting of G-20 countries.
Trump continued to adopt an aggressive tone on trade issues while speaking to Fox Business on Wednesday morning. He said he would be pleased to collect tariffs in case a deal with China was not concluded. At the same time, he did say that an agreement with China was “absolutely possible,” claiming that Chinese leaders “want to make a deal more than I do.”
Tech stocks have remained a dominant force in U.S. markets for most of the year. Trade tensions have failed to dent their prospects. With the probability of a near-term trade deal rising, they stand to move even higher over the rest of 2019.
Tech stocks which have notched up searing year-to-date gains will make great additions to your portfolio. We have narrowed down our search based on a Zacks Rank #1 (Strong Buy) and other relevant metrics. You can see the complete list of today’s Zacks #1 Rank stocks here.
Universal Display (OLED - Free Report) is a leading developer of technology and intellectual property (IP) for the Organic Light Emitting Diodes (OLED - Free Report) market.
Universal Display’s projected growth for the current year is 97%. Its earnings estimate for the current year has improved by 20.2% over the past 60 days. The stock has gained 95.1% year to date.
Bruker Corporation (BRKR - Free Report) designs and manufactures proprietary life science and materials research systems, and associated products.
Bruker’s projected growth for the current year is 15.7%. Its earnings estimate for the current year has improved by 0.6% over the past 30 days. The stock has gained 62.1% year to date.
Match Group, Inc. (MTCH - Free Report) is the world’s foremost provider of dating products and operates a portfolio of more than 45 brands.
Match Group’s projected growth for the current year is 25.7%. Its earnings estimate for the current year has improved by 17.9% over the past 60 days. The stock has gained 55.9% year to date.
j2 Global Inc. (JCOM - Free Report) provides Internet services. It reports primarily in two business segments: Cloud Services and Digital Media.
j2 Global’s projected growth for the current year is 11%. Its earnings estimate for the current year has improved by 4% over the past 60 days. The stock has gained 23.7% year to date.
Ciena Corporation (CIEN - Free Report) is a leading provider of optical networking equipment, software and services.
Ciena’s projected growth for the current year is 43.2%. Its earnings estimate for the current year has improved by 9.9% over the last 30 days. The stock has gained 22.9% year to date.
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