By Matthew Klein | Monday, July 20
Tech Melt-Up. High-flying tech stocks flew even higher today, although
there wasn’t any obvious reason why. The Nasdaq
Composite jumped 2.5%, with many of its biggest
constituents up far more. Microsoft was up more than
4%, Amazon.com was up 8%, and Tesla was up 10%. There
was no news from any of the companies to justify the moves. For perspective,
the broader S&P 500 index, which
includes almost all of the biggest Nasdaq stocks except Tesla (the company
hasn’t fulfilled the index’s GAAP profitability requirement) was up just
0.8% on the day.
In fact, many of America’s big companies were down on the
day, with only 177 of the 500 components of the S&P positive. Moreover, of
the index’s 11 sectors, only three were positive: communication services (which
includes Alphabet, Facebook, Netflix, and Twitter), consumer discretionary (led by Amazon), and technology. Every other category was down on
Monday, with consumer staples, energy, industrials, and utilities all down more
than 1%.
The Shanghai
Composite did even better than the Nasdaq today, gaining
more than 3%. So far this year, the index is up 9%, which is rather remarkable
considering what has happened to China’s economy, much less the global
economy. And unlike the Nasdaq or China’s own Shenzhen exchange, the Shanghai Composite isn’t a tech-heavy index.
The biggest constituent is a distiller of hard liquor popular at banquets,
while the other top index members are banks, insurers, and the state-run oil
company.
Chinese
stocks have been doing well thanks in part to one of the Chinese government’s
periodic efforts to push Chinese retail investors into the market.
(The last time that happened was 2015, which led to an epic bubble and bust.) China’s economic
fundamentals aren’t obviously better now than before the coronavirus crisis.
But the Chinese stock market often diverges wildly from fundamentals—the
Shanghai Composite is still almost 50% below its 2007 peak.
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