If the Dow Jones Industrial Average is poised to come back from its recent run of losses, it might have to be the sector that helped spur the historic bull run to get it back into the green and in Thursday’s trading session, it was technology helping to overcome Wednesday’s 600-point rout as evidenced in the Direxion Daily Technology Bull 3X ETF (NYSEArca: TECL).
TECL was up 10% at the close of the market, while the Dow gained over 400 points. TECL has been reaping the benefits of the historical bull run that has been seeing immense growth in technology stocks, which has helped it return almost 50% year-to-date and close to 80% within the last three years.
However, in the past five days, TECL hasn’t been immune to October’s sell-off, dipping below its 200-day moving average, but bouncing back today as the capital markets recover.
“What happened yesterday was the market got way oversold,” said Tom Essaye, founder of The Sevens Report. “Was a decline on earnings warranted? Yes, but not 10 percent.”
TECL seeks daily investment results equal to 300% of the daily performance of the Technology Select Sector Index. The fund invests in securities of the index, ETFs that track the index and other financial instruments that provide daily leveraged exposure to the index or ETFs that track the index, which includes domestic companies from the technology sector.
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Microsoft Outperforms and Tesla Surprises
The markets were propped up by a spate of positive earnings reports from the likes of tech giants like Microsoft (etftrends.com/quote/MSFT) who bested analyst expectations with $1.14 per share as opposed to the $0.96 per share expected by analysts, according to Refinitiv. In addition, revenue came in at $29.08 billion versus forecasts of $27.90 billion.
In the meantime, electric carmaker Tesla reported a surprise profit at the close of yesterday’s trading session, which was the company’s largest at $312 million.
“Q3 2018 was a truly historic quarter for Tesla. Model 3 was the best-selling car in the US in terms of revenue and the 5th best-selling car in terms of volume,” (etftrends.com/quote/TSLA) CEO Elon Musk said in a letter to investors.
Markets Correcting is ‘Healthy’
Less than a week before Halloween, the bouts of volatility in October already has investors spooked as evidenced by the CNN Money’s Fear & Greed Index, which is tilted heavily to the left deep into fear territory. However, market analysts like Amanda Agati, co-chief investment strategist at The PNC Financial Services Group, said a correction is par for course for a health market.
“Corrections like this are actually healthy for the market,” said Agati. “What is surprising to me is where the finger is being pointed at. It’s not clear to me that anything has changed in the last month.”
In terms of stock market fundamentals, Agati says all is well as evidenced by third quarter earnings season. So far, S&P 500 earnings are up 24.8 percent, while 82% of the companies that have already reported beat estimates.
“This is much more of a sentiment shift than a fundamental shift,” Agati said.
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