Nasdaq composite hits a new milestone: Can it sustain its pace?

The markets reopened after the long Memorial-Day-weekend holiday, and the Nasdaq immediately got back to work, hitting a new milestone in the process.

The Nasdaq Composite index, which is viewed as a proxy for technology stocks, topped 17,000 points when the markets opened on Tuesday. It also ended the day over that threshold — officially marking a new all-time high.

The index finished a volatile day on Tuesday, rising about 0.6%, but it opened lower on Wednesday, falling back below 17,000. As of 10 a.m. Eastern, it had dropped about 0.5% and was back to around 16,930.

A meteoric run

Just three months ago, the Nasdaq Composite hit the 16,000-point level on Feb. 22, getting back to where it had been in November 2021 — before the market crashed and the bear market ensued. However, since retaking the 16,000-point threshold, the index has gained another 1,000 points or roughly 6%. In May alone, the Nasdaq Composite gained 8.6% after slumping in April.

Year to date, the index is up 14.5%, while it has surged 31.2% over the past 12 months. That beats the S&P 500, which has gained 11.4% YTD and 26.2% over the past year. The Dow is only up 3.1% YTD and 17.4% in the last 12 months.

In what was a mixed day on Tuesday for the markets, the Nasdaq rose largely on the strength of NVIDIA (NASDAQ:NVDA). The chipmaker’s stock climbed 7% on the strength of its blowout first-quarter earnings report last week and its 10-for-one stock-split announcement.

The Nasdaq Composite may have also received a boost on Tuesday from a surprisingly good Consumer Confidence report, which showed the first increase in three months. In fact, economists had been expecting another decline.

As such, this reading could bode well for the inflation data set to be released on Friday, when the U.S. Bureau of Economic Analysis is due to issue the latest Personal Consumption Expenditures index for May.

Can the Nasdaq keep charging?

Few pundits predicted this kind of run for the Nasdaq in 2024, following a huge 54% return in 2023. Most projected a sluggish first half of the year and a better second half, with the index recovering in the second half amid expectations of interest-rate cuts.

As we enter the last month of the first half of the year, what can we expect?

A recent poll by Barron’s of money managers and institutional investors called for the Nasdaq Composite to end the year at 17,143, which would be up another 1% from the current level. However, this poll was taken on May 1, so it did not include the 8.6% May increase for the index.

On Wednesday morning, the markets were trending lower as 10-year Treasury yields spiked again to 4.594%, up some five basis points from Tuesday after notching the biggest jump since April. Rising Treasury yields, particularly over the 4.5% level, are seen as bad for stocks.

There are certainly a lot of mixed economic messages out there right now for investors to parse through, but the big data point is valuation, at least from this vantage point. The Nasdaq’s P/E ratio has crept up to 31, which is up from last year and higher than the average.

Investors are advised to keep an eye on the P/E levels for individual stocks, and of course, watch for the inflation data Friday.