The stock market shows incredible resilience despite the recent interest rate hikes. Over the last 72 hours, the stock market has been in green territories, with all the major stocks increasing in value. The sudden upward push of stocks in these recent hours is based on the temporary recovery of the banking system. We do not know yet if the banking system is fully safe and out of trouble, but for the time being, it seems to stabilize again. Moreover, depositors realized that they could have more money in money markets because they are very liquid. As a result, investors feel more confident to invest in capital markets again.
Volatility in the stock market is based on supply and demand. An upward push indicates that investors are buying companies' ownership more and more, which is reflected in the increase in stock prices. Another explanation that also supports this stock rally is that companies’ revenue starts to be reflected in the stock price. In the short-term, stock price is based on supply and demand, but in the long-run, the stock price is correlated to the company’s revenues, and cash flow reinvested in the business.
Stocks are extending gains, which saw NASDAQ move into a bull market for the first time in three years, boosted by mega-cap tech stocks such as Apple, Amazon, and Microsoft. This a great news for growth-stock investors such as Cathie Woods, who strictly invest in growth stocks. Indeed, tech stocks have been recently favored as investors seem increasingly convinced that the Federal Reserve will start cutting interest rates this year despite Fed Chair Powell insisting otherwise. Moreover, tech stocks have been an attractive alternative to banking stocks amid the recent turmoil in the banking sector.
Source: Google Finance
Since the beginning of the year, the NASDAQ has been surging consistently. It opened below 11,000 points in early January. Today, the NASDAQ is nearing the 13,000-point benchmark. This is an increase of more than 20%, which indicates that NASDAQ has entered a bull market. Alibaba ADRs Boo 1.4% pre-market consolidating after recent gains. China's biggest internet platform outlined plans to sell off noncore assets and said that it would consider giving up majority control of its six soon-to-be operating companies. Tesla rises pre-market after the EV maker encouraged customers to take delivery now of its model 3 ahead of an expected decline in tax credit for buyers at the end of March. And Netflix saw its stock price roaring after Wells Fargo claimed that it sees at least a 20% potential upside to the share value and reiterates its $400 per share price target.
So far, the first quarter of 2023 has been the second best-performing quarter for the Nasdaq 100 index in the previous ten years, with more than a 17.5% gain, trailing only the stunning 30% rise in the second quarter of 2020 following the post-Covid rally.