Technology bulls got a helping hand on Wednesday as a key semiconductor firm rallied despite woeful financial results, states Jon Markman, editor of Strategic Advantage.
The Nasdaq 100 closed at 14,665, a gain of 1.8%. The move lifted the benchmark above its 20-day moving average for the first time in ten sessions, resetting the foundation for further gains. Bulls have had a rough go the past several weeks, battered by rising interest rates, geopolitics, and the bearish narrative that the Federal Reserve will create an earnings recession in 2024 as the central bank battles inflation.
The Fed left its key bank lending rate unchanged Wednesday, however, the real market-moving event was the bullish reaction to a report from Advanced Micro Devices (AMD). Shares of the semiconductor designer soared 9.7% despite mediocre sales and profits during the third quarter. Moreover, Lisa Su, chief executive officer, noted that the prospects for the fourth quarter have soured. She said AMD should sell only $6.1 billion worth of chips in Q4 versus the previous forecast of nearly $6.4 billion.
The stock tanked initially, however, later commentary about potential AI chip sales of $2 billion in 2024 revived bullish interest. It was a huge swing and an indication that bears may have overreached during the current correction for tech stocks. The AI story continues to be a positive market mover. There is overhead resistance for the NDX at 14,950, the 50-day moving average. Support is 14,058, the recent low.
November To Remember?
Researchers at Bespoke Investment Group looked into November seasonality yesterday. As you're well aware by now, November has historically been one of the best months of the year for the stock market. The Dow has averaged a gain of more than 1% in November over each of the last 100, 50, and 20 years.
The S&P 500 is on a three-month losing streak heading into November, so Bespoke studied historical monthly losing streaks for the S&P going back to 1928. There have been 51 prior three-month losing streaks for the S&P, and 22 of those extended to four-month losing streaks, the research showed. The last time we had a losing streak longer than three months was a five-month streak of declines that ended in September 2011. And the longest losing streak on record? Bespoke says that occurred back in 1974 when the S&P fell every month of the year from January through September; finally ending at nine months. Talk about a bad start to a year.
The analysts then looked at the 38 three-month losing streaks we've had since WW2. Interestingly, the S&P's decline of just over 9% during the current three-month losing streak is near the average decline of 9.7% seen for all three-month losing streaks since 1946.
In terms of forward performance, the researchers say S&P has seen an average gain of 0.93% in the following month with positive returns 60.5% of the time. Over the next three, six, and twelve months, the S&P's average performance following three-month losing streaks has been slightly stronger than average returns across all periods, the research shows.
And finally, in case you're wondering, this will be just the ninth time since 1928 that the S&P has fallen in each of August, September, and October. The last five times that has happened since 1952, the S&P was higher in November by at least 1%. The last two times it happened were in 1990 and 2016. In November 1990, the S&P gained 5.99%, while the index gained 3.42% in November 2016. The index would go on to post further gains in December of these two years as well. Cool. We would love to see a repeat of that.