(Bloomberg) -- The Nasdaq 100 Index surged into a new bull market Wednesday for the first time in nearly three years as traders pile into technology stocks and angst around the recent bank turbulence eases.
The tech-heavy gauge finished trading up more than 20% from its Dec. 28 closing low, powered by big rallies in megacaps Apple Inc., Microsoft Corp.. and Amazon.com Inc.
It finally scrambled above the key threshold after previous failed attempts to do so last week and in early February. The Nasdaq 100 last entered a bull market in April 2020 after a sharp rebound from its March 2020 Covid lows.
Technology stocks have outperformed this year as investors speculate that weakening economic data and the risk of a recession, heightened by recent bank stresses, may prompt the Federal Reserve to stop raising interest rates sooner than expected. Investors have also been using the sector as a safe-haven amid sharp declines in financials.
“Just as growth and tech stocks suffered the most last year as the Fed tightened rates at an unprecedented pace, it’s not surprising that they would bounce back more than the broad market as people start to see the end of the rate-hike tunnel,” said Chris Larkin, managing director of trading and investing at E*Trade Financial Corp.
Wednesday’s advance comes after the Nasdaq 100 notched two straight weeks of gains, with the index up more than 17% year-to-date after erasing over a third of its value in 2022.
The index’s broader stock-market peers have been laggards by comparison. The benchmark S&P 500 Index has advanced just 4.9% this year and the Dow Jones Industrial Average is down 1.3%.
The Fed raised its benchmark overnight rate by 25 basis points last Wednesday, while adjusting its policy statement to a more dovish framing, saying that “some” — not “ongoing” — hikes were needed to quell inflation.
“While the Fed was more dovish on Wednesday than many market watchers expected, Chairman Powell also stressed that the board doesn’t anticipate cutting rates this year,” Larkin said. “The bear market may be closer to its end than its beginning, but investors should be realistic about the possibility of more volatility on the near-term horizon, in which case tech stocks may be susceptible to underperforming the market, as they often do when sentiment turns negative.”
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