Six days of heavy losses on the Nasdaq market finally came to an end yesterday after a batch of more positive corporate results and a bullish commentary from Goldman Sachs strategist Ms Abby Joseph Cohen brought about a change of sentiment.
Even before the New York markets opened, technology shares on European markets had staged a strong recovery, mainly on the back of half-year figures from Vodafone which came in ahead of market expectations. When Wall Street opened, the Nasdaq sprinted ahead with analysts taking the view that the fall of the Nasdaq index below 3,000 was a buying opportunity rather than a reason to continue selling.
After heavy trading, the Nasdaq Composite Index jumped 171.55 to 3,138.27 while the Dow Jones index of the 30 largest stocks was up 163.81 on 10,681.06. . Earlier, boosted by a 10 per cent rise by Vodafone, the FTSE-100 index closed 2.2 per cent higher, while the Techmark technology market recovered 3.3 per cent.
Most of the Irish stocks which have suffered heavy losses over the past week recovered strongly. Iona was trading 14 per cent higher in early trade, while Trintech was 11 per cent firmer on the Neuer Markt. Londonlisted stocks such as Baltimore and Parthus were also in better demand after their recent heavy falls.
The driving force behind the early rally in telecoms was relief over the sturdy set of figures from Vodafone, which reassured the market it could continue to increase profits in the face of intense competition and expensive licence costs.
Corporate news also gave Nasdaq stocks a boost. Shares of Nasdaq market heavyweight Oracle rose after the software company said it was in an online business deal with Citigroup. Oracle, the world's second-biggest software company, climbed about 10 per cent in early trade and was the market's most heavily traded stock.
The strong gains on the Nasdaq were partly driven by positive comments from Goldman Sachs strategist Ms Cohen, one of the market's most prominent bulls.
She reassured investors with a pronouncement that US economic and corporate profit growth rates were slowing to sustainable rates. She said equity valuations were the most attractive they had been all year and that the Standard & Poor's 500 Index is 15 per cent undervalued looking ahead for the next 12 months.
She advised a market weight position of 35 per cent of the model portfolio in technology and telecommunications stocks. "The fundamental picture remains favourable," Ms Cohen said. She also saw little chance that the Federal Reserve would raise rates anytime soon amid signs the economy was slowing. "Core inflation remains mild mannered and the likelihood of Federal Reserve action to boost interest rates has lessened notably," she said. The Federal Reserve's open market committee meets today.
