The Nasdaq and S&P 500 both rose to all-time highs last week as Amazon, Microsoft, Alphabet, and other tech companies set new stock records. As high-tech companies reach new highs, analysts are beginning to wonder how long we can enjoy the record levels.
New Records for The #FANG Stocks
The S&P 500 set an all-time high last Friday, up 0.8%, with stocks surging from a busy period of strong earnings. The tech-heavy Nasdaq composite also hit a record high on Friday with a 2.2% increase to reach its largest one-day gain since November 2016.
Much of the success was due to huge gains from technology giants, including Apple, Microsoft, and Alphabet, who reported earnings that were larger than expected. Much of Apple’s surge can also be contributed to pre-orders for its new iPhone X, where the first shipment sold out in just 20 minutes and calmed investors’ fears that the phone wouldn’t be as successful as the company anticipated.
Amazon stock peak also contributed to the growth as shares gained more than 13% and broke $1,100 a share for the first time as the company reported quarterly earnings of 52 cents a share versus the projected 1 cent per share. The biggest boost in the company was from Amazon Web Services, which had sales that grew 42% year over year. Amazon’s acquisition on Whole Foods also happened during the reporting quarter and was another boost to revenue.
“We would characterise last night’s Amazon September results as a ‘Picasso-like quarter’ with the company handily beating all metrics across the board,” wrote Daniel Ives of GBH Insights. “Last night’s quarter … is another feather in Bezos’ cap.”
Alphabet, the stock behind Google, also grew almost 5% on increases in its paid clicks and overall ad revenue. Earnings per share came in at more than a dollar higher than anticipated, with much of the company’s growth coming from Asia.
With anticipation for its expanded cloud services, Microsoft also hit record highs as the stock grew more than 6% with strong future guidance. Microsoft posted its largest single-day gain in two years.
Other tech-related companies continued the growth on a slightly smaller scale. Intel shares jumped more than 7%, and the company’s forward guidance is predicted to be better than originally thought. Facebook stock went up more than 4% to reach a new record, although the company hadn’t yet reported its earnings. In this case, much of the growth comes from association with other high-performing tech stocks.
More than half of companies in the S&P 500 had reported earnings before the levels surged, and 76% of companies beat their bottom-line estimates and 67% beat sales expectations.
Can The Tech Giants Maintain This?
Investors should be happy with the new records, but not all experts are predicting that the high levels will stick around. Studies have shown that chasing stocks based on enthusiasm—such as these records or a hot new product—doesn’t lead to lasting gains and can put investors behind the ball.
However, others are saying the growth in tech stock is a sign of things to come and shows the innovation from companies large and small.
“We were amazed when we were getting the numbers last night,” said Randy Warren, CIO at Warren Financial. “When you look at why the indexes are moving up, it’s because of real earnings growth, and there are no signs of that abating.”
Over the course of 2017, information technology as a whole has performed much better than the larger market, with the industry up around 30% compared to the general S&P 500 seeing growth of around 15%.
Whether or not the high levels remain, high-tech companies have already made big contributions to the markets and should enjoy at least some level of success for the rest of the year.