Dow Jones vs Nasdaq 100: A week in review
It has been a volatile period for US markets, in the lead up to and aftermath of the US Presidential Election.
Despite the uncertainty created by the election – over the last five sessions the Dow Jones Industrial Average has surged 2.24% or 635 points, to last trade at the 29,080.17 point level.
In that period, Home Depot has fallen 3.66%, UnitedHealth has risen 1.16% and Salesforce.com has dropped 4.07%.
By comparison, the tech-heavy Nasdaq 100 has faced heavy selling pressure, falling 1.82% or 219 points over the last five sessions, finishing out Thursday at the 11,827 point mark. Indeed, while the benchmark started the week above the 12,000 hurdle, it has drifted lower since, with the Nasdaq falling to around 11,500 points, mid-week.
In that period, Amazon dipped 5.87%, Microsoft has slipped 3.08%, while Apple has eked out a gain of 0.87%.
Markets were whipped into a storm at the start of the week, following news from BioNTech and Pfizer that significant progress had been made on their Covid-19 vaccine. That vaccine, as part of their recent study and according to Pfizer, ‘was found to be more than 90% effective in preventing COVID-19 in participants without evidence of prior SARS-CoV-2 infection.’
This potentially explains the divergence between the Dow and the Nasdaq – between the old and new economy stocks.
Indeed, one of the key reasons technology stocks have been bid up so aggressively in the last 8 or so months has been due, in large part, to the market pricing in the tailwinds the sector has derived from the pandemic. More online shopping (Amazon and Etsy). More time at home (Netflix, Roku and Peloton). More time on our devices (Facebook and Snap). So on and so forth.
Chiefly, the implication is that a sooner-than-expected vaccine and potentially sooner-than-expected re-opened economies would be beneficial to old economy stocks. Instructively, in response to the BioNTech-Pfizer vaccine news, investors bid up airline and travel stocks significantly, while tech-centric stocks, such as e-commerce plays were bid sharply lower.
Beyond that rotation from new economy stocks to old economy stocks, the market has also turned its attention back to coronavirus, as cases of the virus again spike in the United States and other parts of the world. As IG’s Market Analyst, Kyle Rodda put it:
‘From a pure narrative point of view, surging COVID-19 cases in the US and Europe are getting the blame for the anti-risk mood in the market. Just last night, the US and UK achieved the unenviable milestone of recording the most daily cases of the virus since the pandemic began, at around 150,000 and 50,000, respectively.’