The Nasdaq Rose as the Dow Went Flat Because Investors Bought the Tech Dip

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Apple stock was the biggest gainer among Dow components, while the Nasdaq Coposite and the S&P 500 rode large-cap tech to gains. The Dow Jones Industrial Average slipped 23 points.

The market was mixed Wednesday, with tech stocks taking center stage.

The Dow Jones Industrial Average fell 23.29 points, or 0.08% to 29,397.63. Large-cap techs lifted the S&P 500 and the Nasdaq Composite by 0.77% and 2%, respectively, to 3,572.66 and 11,786.43.

Apple (ticker: AAPL) stock rose 3%, the biggest gainer in the Dow; the iPhone maker unveiled refreshed Macs Tuesday. Amazon.com (AMZN) stock rose 3.4%, a day after the EU brought antitrust charges against the retailing and cloud giant. Elsewhere, Zoom Video Communications (ZM), which had fallen 25% for the first two days of the week, rose 9.9% Wednesday as investors bought a compelling dip in tech stocks.

But value stocks, which are more in sync with the economy, fell. The Vanguard S&P 500 Value ETF (VOOV) fell 0.4%. Banks stocks fell even as long-dated treasury yields rose a tick, as the SPDR S&P Bank ETF (KBE) fell 2.4%.

Since Oct. 30, the S&P 500 is up 8.9%, with VOOV up 10.3%, both edging out the Vanguard S&P 500 Growth ETF (VOOG), which is up 7.9%.

Canaccord Genuity’s chief market strategist Tony Dwyer wrote in a note that “a temporary pause” in value’s outperformance is warranted. Others agree. Wednesday was “a reversal from the two days of a very strong value versus growth gain,” Jason Pride, chief investment officer of private wealth at Glenmede, told Barron’s.

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Still, Pride prefers value over growth, as the valuation gap between the two remains stark. He points out that valuations in growth are in their 90th percentile, historically speaking. Value, on the other hand, is trading at valuations in their 75th percentile. And those statistics take into account valuations adjusted for lower interest rates, not just absolute levels of valuations.

Elsewhere, smaller capitalization stocks fell as well, another reversal from a recent risk-on trend. The Russell 2000 fell 0.4% Wednesday and the S&P 400 Mid Cap Index fell 0.17%. Those indexes had outperformed, rising 12% and 10.2%, respectively, since Oct. 30. Smaller companies’ stocks tend to be more volatile than those of larger companies, which have superior scale and access to capital.

Some on Wall Street tout smaller-cap stocks going forward, as they can enjoy a more-pronounced benefit from a fiscal stimulus and the potential approval of a Covid-19 vaccine.

Take Wednesday’s market action in stride. Investors are optimistic about the ongoing economic recovery.

Write to Jacob Sonenshine at jacob.sonenshine@barrons.com