Nasdaq 100 index bull market gains steam despite elevated risks

Technology stocks are doing well despite the rising risks in the financial market. The Nasdaq 100 index jumped to a high of $13,340 on Tuesday, the highest level since August 19th of last year. This means that the index has jumped by more than 24% from the lowest level this year, meaning it has moved into a bull market. 

Big technology companies lead 

The Nasdaq 100 index rally has been helped by large technology companies, which have been more resilient than their smaller ones. Companies like Apple, Microsoft, Nvidia, and Meta Platforms, which have a bigger weight in the index, have risen this year as investors react to their strong results. 

Nvidia shares have jumped because of the trends in artificial intelligence. Analysts believe that the company’s chips will help to power the AI industry in the coming years. Its chips are already being used by the likes of Amazon, Microsoft, and Alphabet. 

Meta Platforms shares jumped after the company’s results showed that it was picking up the pieces after slumping hard in 2022. Microsoft has been a major winner in the AI industry because of its investments in ChatGPT. 

The other top Nasdaq 100 index constituents are Seagen, Airbnb, AMD, Tesla, and Palo Alto Networks. On the other hand, the top laggards in the Nasdaq index are Enphase Energy, Sirius XM, Jd.com, Moderna, Rivian Automotive, Walgreens, and Amgen among others. 

Federal Reserve and US debt ceiling 

The Nasdaq 100 index has risen despite risks in the American economy. For example, the Federal Reserve has continued to hike interest rates this year in a bid to fight elevated inflation. It hiked rates by 0.25% last week, pushing them to the highest level in more than a decade. The Fed is also implementing its quantitative tightening policy by reducing its balance sheet by more than $90 billion per month. 

Therefore, the performance of the Nasdaq 100 index is a sign that investors expect the Federal Reserve will start pivoting in the coming months. Analysts expect that the bank will pause its hikes for several months.

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Meanwhile, there are risks of a government default considering that Joe Biden and Speaker Kevin McCarthy have hardline positions on the debt ceiling. Biden wants a clean debt ceiling bill while the speaker wants the government to cut costs considering that the American debt has jumped to over $31 trillion. 

Again, the price action of the Nasdaq 100 index is a reflection that most investors expect that the two sides will reach an agreement and avoid a default.