Stock Market Today: Big Tech Bounces Back

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The recent rotation away from growth stocks into value names took something of a pause Wednesday as the tech-heavy Nasdaq Composite outpaced the other major indexes by a wide margin.

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Indices continue to provide relatively strong returns, even in difficult investing environments. In fact, in each o the past 10 years, the majority of large-cap fund managers have underperformed the S&P 500.

The traditional method of gaining index exposure is through passive mutual funds and ETFs. However, you might also consider creating a direct index strategy so you can have more control over your investments. Direct indexing essentially replicates the performance of an index mutual fund or ETF by purchasing the underlying securities individually instead of as a bundled package.

This type of strategy allows you to have more flexibility to “customize” your replicated index mutual fund or ETF. Direct indexing also comes with powerful tax benefits as it allows you to harvest losses on the individual holdings.

The Nasdaq closed up 2% at 11,786, as investors took advantage of cheaper share prices created by a period of underperformance. By comparison, the Dow Jones Industrial Average finished lower by 0.1% at 29,397, while the broader S&P 500 added just 0.8% to hit 3,572. 

Over the past five days, the Russell 1000 Value index had outperformed the Russell 1000 Growth index by 8 percentage points. But for a session, at least, the rotation was reversed. 

“The underperformance of the Russell 1000 Growth vs. Value indices over the past 10 days has reached a level that suggests a temporary pause in the strong relative performance for Value,” writes Canaccord Genuity equity strategist Tony Dwyer.

Gallery: The 7 Best SPDR ETFs to Buy and Hold (Kiplinger)

Wednesday’s top-performing stocks included the usual suspects — (AMZN, +3.4%), Apple (AAPL, +3%) and Microsoft (MSFT, +2.6%).

Other action in the stock market today:

  • The Russell 2000 was up 0.1% to 1,736.
  • U.S. crude oil futures gained 0.1% to close at $41.49 per barrel.
  • Gold futures were off 0.7% to finish at $1,863 per ounce.

The bottom line is that it’s probably an overreaction to dump your growth stocks.

After all, many of the best stocks of the pandemic should continue to outperform even after COVID-19 is gone, and many of them are growth stocks. Then there’s a case to be made for promising mid-cap stocks, which offer the dual threat of both growth potential and stability.

And for a really growthy play, consider the telehealth stocks we’ve been evaluating. True, the nascent telehealth sector has already boomed during the pandemic, but the market for telehealth services is forecast to grow by leaps and bounds over the next five years. 

Take a look at some of analysts’ favorite pure-play telehealth stocks.

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