(News Bulletin 247) – Wall Street continued to hold up well on Friday, a resilience largely due to the strength of technology stocks which now seem to be playing the role of safe havens in the face of the serious concerns that have emerged in recent days.
US ‘tech’ stocks benefit not only from their relative immunity to fears surrounding the health of the global financial system, but also from the recent decline in bond yields which makes them more attractive to investors looking for yield.
Over the week as a whole, the Nasdaq Composite – a New York index with a heavy technology weighting – has so far posted a gain of more than 4% despite the severe tremors that shook the markets.
Since the start of the year, the index has gained another nearly 12% despite its downward movement in February, which was explained by the sharp rise in American long rates.
High-tech stocks are clearly benefiting from arbitrages in their favour, while market participants are wondering if the difficulties in the banking sector have passed.
The American tech giants, gathered under the acronym ‘GAFAM’ for Google (Alphabet), Amazon, Facebook (Meta) Apple and Microsoft, have posted increases ranging from 14% to 65% since the start of 2023.
The rise in the American technology compartment is certainly explained by the resistance of the results of companies in the sector, but also by valuations deemed attractive after the correction of the Nasdaq in 2022.
The sector should also benefit from a possible slowdown in rate hikes from the Fed, which wishes to avoid aggravating the banking crisis by raising the cost of money too much, a factor likely to favor the risk appetite of the investors.
“Tech stocks are now perceived as a haven of peace in the markets and the big players in the sector are the big beneficiaries,” said Dan Yves, analyst at Wedbush Securities.
For the specialist, the ‘GAFAM’ have comfortable cash flow, but have nevertheless launched major cost reduction programs, an element which could be synonymous with good surprises in terms of results in view of the cautious forecasts communicated at the start of the year. year, he says.
According to Dan Yves, technology stocks could thus show an increase of more than 20% this year.
The analyst shows his preference for cybersecurity stocks, but also says he likes Microsoft, as well as Apple, which he considers his favorite stock in the sector for 2023, while Tesla remains his stock of choice on the side of ‘ disruptors’.
A small downside, US tech stocks remain highly exposed to US consumers, a cyclicality that could penalize them as household morale begins to falter and recession looms.
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