Markets Extend Rally, Led by Tech Sector

Market Moves

As bond and commodity markets languished, the stock market indexes extended their strong rally and closed decisively higher yesterday. Investors showed that they expect this bullish market to continue well into 2020. The S&P 500 (SPX), up 27% for the year, the Nasdaq 100 (NDX), up 35% for the year, and the Dow Jones Industrial Average (DJX), up 21% for the year, all closed at 52-week highs.

The most influential stock at the moment, and a component of all three indexes, is Apple Inc. (AAPL). Over the past three trading sessions, Apple shares have charged ahead by nearly 10%, on pace to nearly double the Nasdaq 100 performance this year. As Apple continues higher, it creates a bullish forecast for 2020.

Chart showing the performance of Apple Inc. (AAPL) vs. the QQQ ETF

Half of Dow Jones Industrial Index Components at Highs

At the close of trading today, only six out of the thirty component stocks that make up the Dow Jones Industrial Average closed lower than the previous day. The only stocks that rose higher than Apple's 1.71% increase were UnitedHealth Group Incorporated (UNH) at 2.29% and Pfizer Inc. (PFE) at 2.11%. When health care stocks and technology stocks both lead the index, this is also a bullish signal.

Chart showing the performance of Apple Inc. (AAPL) vs. the SPY ETF

Yet another bullish signal comes in the number of Dow index components at or near their 52-week highs. The majority of these components (16 of the 30) closed at or near their 52-week highs. The breadth of this rally signals that there is enough investor enthusiasm to drive higher into 2020.

Chart showing the performance of Apple Inc. (AAPL) vs. the DIA ETF

Microsoft and Apple drive Nasdaq 100 higher

Microsoft Corporation (MSFT) and Apple together now account for nearly 30% of the weighting of the Nasdaq 100 index. Along with Intel Corporation (INTC), these stocks are components in all three major indexes. Where these two stocks lead, the indexes will surely follow. With both of these bellwether stocks hitting their 52-week highs, it indicates that the market's bullishness is not ephemeral and may be likely to continue.

Chart showing the performance of Microsoft Corporation (MSFT) and the QQQ ETF

The Bottom Line

Stocks closed strongly higher today to extend the rally that began the previous week. Apple and Microsoft both led the way higher, along with stocks in the health care sector. 

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