A tech share recovery was the key theme in a good day for US stock markets on Wednesday. Tradefair brings you the latest financial market news...
Most investors who stayed invested throughout this pandemic are still sitting on pretty substantial gains in the technology space."
- Jay Jacobs, Global X ETFs
Following three days of losses, US stock markets staged a recovery on Wednesday (September 9), driven by significant gains on the tech-heavy Nasdaq Composite. Technology shares had their best day in just over four months.
Both the Dow Jones Industrial Average and the S&P 500 also ended the day in positive territory, with the latter posting its biggest daily gain since June.
In Europe, markets made a slow start to the day on Thursday as investors awaited the latest interest rate decision from the European Central Bank.
Wall Street recovers
The Nasdaq's return to growth on Wednesday saw the index advancing by 2.7% to 11,141.56 points. This was its biggest uptick since the 3.6% rise recorded on April 29.
Heavy tech buying drove the positive trend, with shares in Apple, Tesla and video communications firm Zoom all rising on the day.
This rebound followed three consecutive days of falls, which saw the Nasdaq dropping by 10% between the end of trading on Wednesday September 2 and the close on Tuesday September 8. Markets were closed on September 7 for the US Labor Day holiday.
The 10% drop from its previous peak meant the index was technically in 'correction' territory.
Meanwhile, the Dow, which slid by more than 3% on Thursday and Friday last week and lost a further 2.2% on Tuesday, rebounded with a gain of 1.6% on Wednesday. This daily increase came despite the index dropping nearly 238 points in the last half hour of trading.
The broader S&P 500 followed a similar pattern, increasing by 2% on Wednesday after tumbling by almost 7% over the previous three trading days.
A drop-off from previous highs
The declines witnessed over the past week knocked both the Nasdaq and S&P 500 off the record highs they reached at the start of the month.
Investors have seen the main Wall Street indices embark on a steady upward march over the last six months, despite the ongoing impact of the coronavirus pandemic on the American economy.
The Nasdaq surged by more than 75% between March 23 and September 2, while the S&P 500 gained 60% over the same period. The Dow fell by more than 36% between mid-February and late March, but has since posted a 50% gain from the yearly lows recorded in the spring.
Speaking to CNBC, Jay Jacobs, head of research and strategy at fund management firm Global X ETFs, said the recent correction should be viewed in the context of the year as a whole.
"The Nasdaq 100 rose about 80% since March lows, and pulled back 10%, so when you think about it that way, it isn't that major of a move," he noted.
"Most investors who stayed invested throughout this pandemic are still sitting on pretty substantial gains in the technology space."
Asked for his views on possible drivers of tech stock trends going forward, Jacobs predicted "substantial growth in profitability" for some technology companies. He pointed to trends in the cloud computing sector in particular, where some firms have been increasing their revenues by more than 20% a year.
In the last quarter, businesses like Salesforce have seen large increases in earnings. Zoom has reported a profit, thanks to a substantial upturn in user numbers as the Covid-19 pandemic forced millions of people around the world to work remotely.
Europe awaits ECB decision
Morning trading on Thursday saw Europe's main markets relatively subdued as the ECB prepared to announce its interest rate decision. Analysts have suggested the central bank could raise concerns about the rise of the euro.
In London, the FTSE 100 was down by 0.7% towards the end of the morning trading session. The fall followed an announcement from UK prime minister Boris Johnson that social gatherings will be limited to no more than six people in England from Monday September 14, a move that could affect the recovery of the hospitality industry.
The UK has witnessed a steep increase in confirmed cases of coronavirus in recent days.
Elsewhere, Germany's DAX index was up by nearly 0.3% towards the end of Thursday morning, while France's CAC 40 witnessed an early fall of 0.5% but ended the session largely flat.
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