US update: Tech lead bounce back, pessimism prevails at retail end, tax law may hurt techs

Claire Hunte 17:55, 9 February 2018

After a rollicking ride, stocks reversed losses at close on Friday. The Dow Jones Index rose 330 points or +1.38% to 24,190.90 and the S&P 500 nipped up 38 points or +1.49% to 2,619.55 as ten out of 11 sectors made gains led by technology up +2.53% and real estate up +2.40%. Energy fell -0.35%.

The tech-heavy index, Nasdaq, was down 113 points or -1.66% in afternoon trading but climbed 97 points or +1.44% to close at 6,874.49.  Nasdaq has had an interesting week with the five largest tech companies losing $437bn in market cap as a result of the sell off according to CNBC.

Technology from rout to win

Shares in major tech companies rebounded or pared losses after diving on Thursday and in earlier trading. 

 Semiconductor companies also snapped back with Intel up +2.81% and Advanced Micro Devices  gained +0.80%Nvidia rose +6.69% after market-beating earnings. Meanwhile S&P Global Ratings warned in a report that the tax overhaul in the long run could have a negative impact on the credit ratings of technology issuers. 

Although tech companies will improve their cash flows through lower corporate tax rates and gain access to “trapped” foreign earnings through repatriation.  S&P warned that it believed that "the overall industry credit profile will weaken over time, largely because of the potential for more aggressive financial policies in response to greater access to overseas cash."

Individual investors lose faith as volatility strikes

Meanwhile, the American Association of Individual Investors (AAII) released the results of its survey for the week ended Wednesday and showed that individual investors expecting shares to slide over the next six months increased 6.3 percentage points to 35%.  The bearish sentiment came before Thursday's dramatic 1,000 fall on the Dow.  

Pessimism was last higher on November 16, 2017 (35.2%). The increase puts bearish sentiment above its historical average of 30.5% for the first time in nine weeks. 

The latest AAII Sentiment Survey also revealed that a percentage of individual investors expecting a decline in stock prices is at a three-month high and optimism is at a two-month low. The organisation says the shift was "not unexpected given the market’s recent volatility and the recent streak of unusually high bullish sentiment readings. At current levels, all three sentiment indicators are within their historical ranges."