Nasdaq hits record high as tech stocks rebound from summer sell-off

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Tech stocks propelled the Nasdaq Composite to a new high on Friday for the first time since July in a sharp turnaround after falling as much as 15 per cent during the summer.

The technology-heavy index rose 1.4 per cent to 18674.37, surpassing the previous intraday peak of 18671.07.

“Each time we panic, the market continues to rise. At some point you stop panicking,” said Luca Paolini, chief strategist at Pictet Asset Management.

Many analysts had predicted that falling interest rates would shift investors’ focus from big tech companies to more cyclical sectors and heavily indebted groups. 

But investors have scaled back their expectations of further US interest rate cuts since the Federal Reserve made its first reduction since the pandemic in September.

Irene Tunkel, chief US equity strategist at BCA Research, said the “Magnificent Seven” large tech companies were benefiting from both stronger earnings and investor optimism over artificial intelligence.

In a reference to next month’s US presidential election, in which Donald Trump is facing Kamala Harris, she added that such investor enthusiasm for tech was “not especially sensitive to the economic or election cycles”.

Tunkel described investors’ stance as a “heads I win, tails you lose” bet, in which tech companies prospered in a variety of economic scenarios.

Some analysts expect other sectors to join Big Tech in driving the market higher, as earnings improve and as political uncertainty reduces after the November 5 election.

Third-quarter earnings season started this month with above-consensus reports from large banks.

Mona Mahajan, senior strategist at Edward Jones, said earnings growth outside the tech sector could also lead to a “broadening” in stock performance. “We think there are opportunities elsewhere,” she added.