Some considerations for the NASDAQ

US Equities hard sharp gains in the overnight session, all three main indexes out of the US saw their highest valued close in nearly six weeks. The NASDAQ led the charge with 2.6%, next was the S&P500 at 1.6% and the Dow neared a 1% rise, Apple (+6.4%) and Amazon (+4.8%) were the tech leaders of the day. Buzz is in the market with investors looking for good things from Prime day and the new iPhone 12 in the not too distant future.

Beyond the hype of Apple and amazon a few other factors should be considered when thinking about the jumps in prices overnight.

Overweight

The very first thing that comes to mind on Apple and Amazon is the weighting on the NASDAQ. Combined both entities are almost a ¼ of the index, that is two incredibly obese stocks that have driven the NASDAQ’s rally within inches of its all-time high.

Stimulus

And savvy investors have taken note and taken advantage of the situation, to me investors are on a rotation back from cyclicals again. With all the uncertainty on the US elections and stimulus, which impacts the recovery speeds. It makes sense that investors are deciding to put their money back into growth stocks that comforted and cushioned their wallets through the pandemic, when they couldn’t be sure what was next.

Stock options, Volatility and Stock Prices

One of the more interesting bits from the moves has come from tandem surges in stocks and volatility, usually the relation ship has them moving away from one another not with each other. This phenomenon is a very 2020 event, it has happened a few times before, most recently before and during the last earnings season. It is a signal that stock option demand is growing, and in a low volume trading day like yesterday (Columbus Day), prices can move more freely on less.

NASDAQ, Dow Jones Industrial, S&P 500 all trading higher.