Buy 5 High-Flying Tech Behemoths To Gain From Market Rally

Wall Street bull run has largely remained unaffected by the severe outbreak of deadly coronavirus in China. Several economists remained concerned regarding the global and Chinese economic recovery as they are of the opinion that it might be delayed.

Various recent economic studies revealed that the U.S. economic growth rate is likely to be sluggish in first-quarter 2020 thanks to the coronavirus outbreak.

However, Wall Street has been able to sustain its longest bull run amid this backdrop. Following a fabulous 2019, all three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — are up 2.6%, 3.8% and 7.3%, respectively.

On Feb 10, both the S&P 500 and the Nasdaq Composite closed the day with fresh all-time highs, while the Dow is close to a new high. Moreover, the Technology Select Sector SPDR (XLK) — the largest sector within the benchmark S&P 500 index — jumped 10.2% year to date.

Technology Stocks Fuel the Rally

The technology stocks have primarily propelled the impressive bull run. The world is witnessing rapid technological improvements owing to unprecedented growth in high-speed mobile Internet traffic, particularly with respect to wireless data and video. These developments have transformed this industry into an ever evolving, inventive and keenly contested space.

Growing deployment of next-generation super-fast 5G technology and massive application of IoT has created significant demand for highly technically sophisticated products. Moreover, large tech companies are rapidly shifting to digital media platform offering online TV streaming services, resulting in innovative product differentiation.

Moreover, the technology sector is expected to benefit most from the interim trade deal between the United States and China. An end to the U.S.-China trade spat is likely to restore Chinese and global economic growth, which in turn will create demand for high-tech U.S. products.

Likewise, the repeal of tariffs on Chinese intermediary goods should raise the profit margin of U.S. tech giants. Moreover, clinching a lasting agreement with China, which will stringently protect U.S. intellectual properties, will be immensely beneficial to the home-grown tech behemoths.

Strong U.S. Economic Data

On Feb 7, the Department of Labor reported that the U.S. non-farm job addition came in at 225,000 surpassing the consensus estimate of 162,000. The unemployment rate remained at 50-year low-level of 3.6%. Average wage rate improved 3.1% year over year, reflecting the 18th successive month of 3% or above wage rate growth.

On Feb 3, the Institute of Supply Management (ISM) reported that the U.S. manufacturing activities index for the month of January came in at 50.9 —its highest since July 2019 and first expansion after five consecutive months of contraction.

Get The News You Want

Read market moving news with a personalized feed of stocks you care about.

Get The App

On Feb 5, the ISM stated that non-manufacturing (services) sector grew for the 120th consecutive month in January to 55.5. Any reading above 50 means expansion and a reading above 55 means excellent expansions.

On Jan 28, the conference board reported that its consumer confidence index for the month of January came in at 131.6 — the highest since August 2019. Moreover, the expectations index, which is a measure of consumers’ short-term (for the next six months) outlook for income, business and labor market conditions, increased to 102.5 from 100 in December.

Our Top Picks

We have narrowed down our search to five tech giants that have popped in 2020 and still have strong momentum left. All of these stocks are member of any one of the three major indexes and advanced more than the index so far this year. Each of our picks carries either a Zacks Rank #1 (Strong Buy) to 2 (Buy). You can see Zacks Investment Research