Nasdaq Stays Medium-Term Bullish Despite String of Lower Highs
The tech-heavy index recently pulled back slightly due to brief profit-taking and rotational pressure in mega-cap tech stocks, though it remains up significantly year-to-date
Quick overview
- The tech-heavy index has experienced a slight pullback due to profit-taking and rotational pressure in mega-cap tech stocks, despite being significantly up year-to-date.
- A notable slowdown in the semiconductor and AI sectors has weighed on the index, overshadowing gains from companies like Meta.
- Recent labor data indicated a slowdown in hiring and a rise in unemployment, initially boosting stock rally expectations for an interest rate cut from the Federal Reserve.
- The technology sector remains dominant, comprising 68.5% of the core index, while the market anticipates continued growth despite potential profit-taking.
The tech-heavy index recently pulled back slightly due to brief profit-taking and rotational pressure in mega-cap tech stocks, though it remains up significantly year-to-date
The primary weight on the index has been a sharp cooldown in the semiconductor and artificial intelligence sectors. Heavyweights like Micron and other chipmakers faced heavy profit-taking and downward pressure, completely overshadowing pockets of strength like Meta (which jumped on cloud-computing expansion news).
Fresh labor data showed a sharp slowdown in hiring (only 57,000 jobs created) with unemployment ticking up to 4.2%. This initially sparked an early-morning stock rally as traders’ bets increased for an interest rate cut from the Federal Reserve later this month; momentum failed to protect tech stocks from ongoing valuation corrections.
Despite the recent stretch of lower session highs, the technical trend for the tech index remains medium-term bullish. It is holding above key exponential moving averages, though negative momentum divergence on the Relative Strength Index (RSI) signals that further choppy, seasonal profit-taking is highly possible in the near term.
Trailing P/E Ratio (TTM): 35.5x. Mega-cap tech (Nvidia, Apple, Microsoft, Alphabet) continues to command a premium multiple relative to the broader S&P 500 (~24-25x) due to intense secular growth expectations in AI infrastructure and cloud spend.
Forward P/E Ratio: 22.8x to 26.1x . The gap between trailing and forward metrics highlights aggressive analyst expectations for double-digit earnings growth over the next 12 months.
Sector Concentration: Technology accounts for 68.5% of the core index’s weighting, followed by Consumer Discretionary at 16.4%.
: The 10-year US Treasury yield is hovering around 4.47%. Fluctuations here act as the primary gravity for Nasdaq multiples, as higher discount rates compress long-duration growth valuations.
: Market conditions reflect an expected easing bias, with the current Fed Funds rate sitting around 3.75%, buffering liquidity across growth equities.
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