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You are here: Home / Government / Tech Stocks Drive Market Rally
Dow Tops 19000 for First Time, Signaling Optimism for Tech Sector
Dow Tops 19000 for First Time, Signaling Optimism for Tech Sector
By Jef Cozza / CRM Daily Like this on Facebook Tweet this Link thison Linkedin Link this on Google Plus
Wall Street reached record highs today as the Dow Jones Industrial Average topped 19,000 for the first time in history. But as fast as the overall market has grown, it has been outpaced by the tech-heavy NASDAQ, which rose 0.4 percent early today to reach 5,388, double the pace of the Dow’s rise of 0.2 percent.

The NASDAQ also reached an intraday record yesterday, with technology shares seeming to drive most of the buying. In particular, Facebook's shares rose 2.3 percent after the company announced a $6 billion stock buyback program.

Mergers Driving Prices Up

But Facebook was far from the only winner this week. Shares of Identity theft protection company LifeLock jumped more than 15 percent on the news that it had been acquired by Symantec for $2.3 billion. Mergers and acquisitions headlines also drove Applied Micro Circuit’s stock up 11 percent after the company announced that it had reached an agreement to be acquired by chip manufacturer Macom Tech for $770 million.

The gain in technology stocks in particular represents a welcome change in the market. Tech company stocks had fallen 0.4 percent since the U.S. election. And 174 companies reached new highs on the NASDAQ, while only five reached historic lows.

But as strong as the technology sector has been in recent days, it seems to represent only part of a broader story of market optimism, with other U.S. stock indexes, such as the S&P 500 and Russell 2000 indexes, also demonstrating gains. In fact, almost every sector was showing positive movement in early trading, with only healthcare falling. The healthcare market has been driven lower by Medtronic, the medical device maker, whose shares fell 8.7 percent on news that it had missed sales expectations.

Optimism for the Future

The news wasn’t all good for tech companies, however. Shares of cybersecurity firm Palo Alto Networks fell 13 percent in early trading after the firm announced slower quarterly growth and lowered expectations for revenue growth this quarter.

Nevertheless, tech stocks showed remarkable strength given their post-election slump. Part of this might be due to investor expectations for even more mergers and acquisitions activity in the future. Under the Obama administration, the U.S. Department of Justice has taken a skeptical eye toward proposed tech and media mergers that it viewed as prejudicial to consumers. The incoming Trump administration has promised to take a much more business-friendly approach toward business regulations.

In addition to leading to further consolidation in the tech space, a decline in regulations and consumer protections could also spell good news for tech sector profits in the future. The incoming administration has taken a dim view of concepts, such as Net Neutrality, that consumer advocates argue are essential to maintaining a free and open Internet, but ISPs have pushed against on the basis that such regulations represent an undue burden on profitability.

Image credit: iStock/Artist's concept.

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