Topline
Massive technology stocks broke their slump Monday, leading a broader rally that largely stemmed from President Joe Biden’s announcement he won’t seek reelection and his subsequent endorsement of Vice President Kamala Harris, as experts said the market recalibrated its expectations of a Donald Trump victory—though effects of stock price movements very well may be fleeting.
Harris, who is still not officially the Democratic nominee, has significant ties to major tech firms … [+]
Key Facts
The tech-heavy Nasdaq stock index rose nearly 1% by late morning, on pace for its best day in nearly two weeks, while the broader S&P 500 gained 0.5% and the less tech-concentrated Dow Jones Industrial Average was flat—a spike that came after Biden’s exit from the race led to a slight downward shift in Trump’s election odds in betting markets.
The recovery comes after last week’s selloff, when the S&P’s and Nasdaq’s more than 2% respective losses marked their worst week since April.
Among the big winners Monday were big technology stocks, as shares of four of the six West Coast tech firms valued at more than $1 trillion rose 0.5% or more, led by Google parent Alphabet, Facebook parent Meta and Nvidia stocks’ 2% rises.
On the sidelines during Monday’s rally were stocks that rallied last week as investors reacted to the increasing likelihood of another Trump presidency; the S&P’s energy sector’s 0.4% loss was the steepest of any of the index’s 13 sectors as it pared recent gains tied to Trump’s plans to decrease regulation.
The recent stock market “rotation toward ‘red’ sectors and away from ‘blue’ ones…could at least partially reverse in the coming days as markets parse the latest developments,” wrote Solita Marcelli, UBS Global Wealth Management’s chief investment officer Americas, in emailed comments.
“The Trump trade could begin to fade,” added Wells Fargo Investment Institute president Darrell Cronk, as last week’s Trump tilt caused energy, financials and raw material stocks to rally and big tech stocks, which typically have an outsized exposure to selling products in China and producing high-tech goods in Taiwan, slumped as Trump touted aggressive trade policy in the region.
The stock market fallout of shifting expectations for November’s election will likely be “very short term,” Sevens Report founder Tom Essaye wrote to clients, as more directly impactful developments like corporate earnings growth and interest rate movements are likely to more directly impact equity prices.
How Would Kamala Harris Impact The Stock Market?
Ultimately, it’s bottom lines that most directly drive investor activity, not who’s in the Oval Office: Morgan Stanley strategist Michael Wilson told clients Monday the economic “cycle plays a larger role in how stocks trade broadly and at the sector level than who is in the White House.” As for Harris herself, her economic policy record is fairly scarce, though Isaac Boltansky, managing director of U.S. policy research at brokerage firm BTIG, told MarketWatch a “Harris presidency would be, for all intents and purposes, a continuation of the Biden administration.”
What Is Harris’ Impact On Tech Stocks?
The overlap between Biden and Harris is probably not a bad thing for the massive technology firms which have exploded in value amid the artificial intelligence gold rush, especially considering those companies’ outsized exposure to dealings with China and Trump’s’ indication he hopes to distance the U.S. economy from China. Harris, who is still not officially the Democratic nominee, has significant ties to major tech firms dating back to her time as a California prosecutor, the home of Silicon Valley, and experts say she largely played nice with leading firms like Google during her time in California politics.
Key Background
Also bouncing Monday were badly battered semiconductor chip stocks, which tanked last week as Trump shared policy ideas which were viewed as a major tailwind for the sector, and the iShares Semiconductor exchange-traded fund (SOXX) rose more than 2%, the biggest gain for the SOXX since July 9. The last two weeks have been “quite confusing,” remarked Yardeni Research founder Ed Yardeni, as the tech stocks which led the last year-and-a-half’s record-setting rally sold off. It’s hard to say whether the slide, with the likes of Nvidia and Facebook parent Meta’s stocks falling more than 10%, was a result of shifting regime expectations or a routine decline after significant gains. The S&P is up 51% since Biden’s 2021 inauguration, having gained 83% during Trump’s four years in office. Driving the Biden era gains are tech stocks like Nvidia, up over 800% during the time frame, and Microsoft, up over 100%.
Further Reading
Read More: Is Kamala Good For Stocks? ‘Blue’ Stocks Lead Market Rally