Tuesday looked like it would be another nasty day for tech stocks, with the Nasdaq Composite plunging more than 2% in early trading. However, the index pared nearly all of these losses – and made a brief push into positive territory – as bargain hunters swooped in.
Cloud stocks in particular benefited from the buy-the-dip trade, swinging higher after a negative start. Among notable gainers in this corner of the tech sphere were Twilio (TWLO, +3.9%), Amazon.com (AMZN, +1.1%) and CrowdStrike (CRWD, +4.0%).
But while the Nasdaq finished down just 0.1% at 13,389, the Dow Jones Industrial Average suffered a much worse fate, slumping 1.4% to 34,269 on weakness in energy stock Chevron (CVX, -2.6%) and consumer discretionary name Home Depot (HD, -3.1%).
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"What started in technology earlier this month has finally moved over to the broader markets," says Ryan Detrick, chief market strategist for LPL Financial. "Although we are coming off a record earnings season, continued supply chain and labor shortages are adding to potential inflationary pressures."
"Given that equity markets are still in shouting distance of all-time highs, it is not surprising to see investors hit pause and evaluate the various catalysts for the next move higher in stock prices," adds Brian Price, head of investment management for Commonwealth Financial Network. "For the time being, I think that investors may remain on edge until there is more certainty from Washington regarding fiscal policy.
Other action in the stock market today:
- The S&P 500 fell again, off 0.9% to 4,152.
- The small-cap Russell 2000 suffered only minor damage, declining 0.3% to 2,206.
- Palantir Technologies (PLTR, +9.4%) got a big earnings boost today. The data analytics firm said revenues surged 49% in its first quarter to $341 million – more than analysts were expecting – while adjusted earnings of 4 cents per share matched forecasts.
- Novavax (NVAX, -13.9%) took a hit today after the drugmaker said it will not seek regulatory approval for its COVID-19 vaccine in the U.S., U.K. and Europe until the third quarter of this year – later than initially expected. NVAX also said it will not meet its goal of producing 150 million shots per month until the fourth quarter, missing its initial third-quarter target.
- U.S. crude oil futures rose nearly 0.6% to settle at $65.28 per barrel.
- Gold futures finished fractionally lower at $1,836.10 an ounce.
- The CBOE Volatility Index (VIX) made another big move higher, gaining 9.5% to 21.53.
- Bitcoin prices recovered 1.5% to $56,706.75. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)
Stick to Stocks With Core Financial Strength
There's a simple explanation for the recent weakness in tech: froth. At least that's according to David Bahnsen, chief investment officer at The Bahnsen Group.
"When a stock's gain becomes dependent on multiple expansion that is driven by a constant flow of new money, new momentum and new popularity, eventually the game ends," Bahnsen says. "Given the froth in tech stocks, investing in cash-generating companies with strong balance sheets is more important than ever."
Good advice, given that cash can make investments shine for a litany of reasons.
Cash helps growth companies fuel the R&D necessary to keep them among the world’s top innovators. It also can help more established companies pay secure (and steadily rising) dividends over time.
And these battleship balance sheets aren’t too difficult to find – as we’ve compiled and reviewed a full 25 of them for you. If you’re looking for a who’s who of companies with A+ financials, and thus plenty of resources to hurdle whatever obstacles the market throws their way, read on as we highlight 25 blue chips that fit the bill.
Karee Venema was long PLTR as of this writing.
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