October 25, 2020

Stock Market Today: Stocks Tiptoe Forward as Stimulus Talks Persist

3 min read
Stocks carved out modest gains Thursday as Americans continued to weigh stimulus hopes against more...

Stocks carved out modest gains Thursday as Americans continued to weigh stimulus hopes against more evidence that the economy needs Congressional intervention.

Initial jobless claims declined last week – to 840,000 filings from 849,000 the week prior – but the figure was higher than economists expected.

Michael Gapen, chief U.S. economist at Barclays Investment Bank, also pointed out that “although initial jobless claims have generally moved lower in recent weeks, the rate of decline has slowed markedly since late August, which suggests the rate of job separation risks is leveling out at elevated levels.”

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But whether Washington will help the situation before the November elections remains in the air. House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin continued to negotiate Thursday, though the former shot down the idea of a standalone airline-industry deal unless Republicans commit to a larger, broader rescue bill.

The Dow Jones Industrial Average managed to advance, albeit by only 0.4% to 28,425. The Nasdaq Composite fared a little better, gaining 0.5% to 11,420 thanks to help from stocks such as Facebook (FB, +2.2%) and Micron Technology (MU, +3.1%).

Other action in the stock market today:

  • The S&P 500 gained 0.8% to 3,446.
  • The small-cap Russell 2000 outperformed yet again, gaining 1.0% to 1.627.
  • International Business Machines (IBM, +6.0%) announced that the 109-year-old company would split into two companies. It will spin off a new company housing its managed infrastructure services, while the remaining IBM will focus on the cloud and artificial intelligence.

How Long Will Technology’s Lead Hold Up?

One common thread among analysts is that tech stocks might take a backseat once the economic recovery picks up steam again, whenever that might be.

Technology, the best-performing sector in 2020 with roughly 30% total returns (price plus dividends) is indeed overpriced. And many money managers believe investors might rotate from tech into more cyclical stocks to capture potential gains from a vaccine or specific stimulus measures.

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But we believe it’s a mistake, especially for long-term investors, to abandon tech, which the Wells Fargo Investment Institute writes “has become more of an ‘all-weather’ sector – outperforming during the recent bull and bear markets (from 2009-2020).”

That’s because COVID didn’t necessarily create trends so much as accelerate their adoption. Forecasts show that the opportunity for cloud computing stocks, e-commerce stocks and other digital trends should continue to grow. And the products humans use are only becoming more sophisticated, driving more demand for semiconductors and other electronic components.

But picking individual tech stocks might be more risk than you’re willing to bite off, especially given some of the sky-high valuations in the space.

No worries there: You have a wealth of technology-focused funds at your disposal – from broad-based funds that give you access to the entire sector, to industry-specific funds such as semiconductor ETFs, to even funds that invest in “themes” such as telehealth and remote work. Here, we examine 15 technology ETFs that give you everything from plain-Jane, buy-and-hold sector exposure to tactical plays on the hottest technological trends.

Kyle Woodley was long FB as of this writing.

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