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Tech makes a comeback as Wall Street in the trendy trade

SAN FRANCISCO (Reuters) – Wall Street’s beloved tech trading back on.

FILE PHOTO A trader points to a screen that is displayed FANG+, the group of highly traded technology and tech-enabled companies, on the floor of the New York Stock Exchange (NYSE) in New York city, USA, July 11, 2018. REUTERS/Brendan McDermid

The AMERICAN technology shares this week took back their title as the stock market the most profitable bet of the year, and the so-called FANG stocks have regained their shine after investors dumped the high-flying group in December on fears that the ten-year-old bull market was dying.

San Francisco, a unicorn companies throws on tech’s new impulse. Ride-hailing company Uber Technologies Inc. is planning to kick off a long-awaited ipo in April, Reuters reported on Thursday.

That put Uber close on the heels of smaller rival Lyft Inc., which was released for the filing of an initial public offering at the beginning of March, after two strong months for technology stocks. The Nasdaq index is now on track for the strongest quarter since 2012, recovering from its worst quarter since 2008.

“There was a lot of forced de-risking by hedge funds in December,” said Joel Kulina, a trader at Wedbush Securities who specializes in the technical inventory. “Now there’s a lot of FOMO,” or “fear of missing out,” he said, a familiar motivation of the AMERICAN investors in the past few years.

The S&P 500 information technology index has increased 3.6 percent so far this week and is up 16.4 percent year-to-date, edge of a 15.4 percent gain in the industrial index, which led since February, but it was stopped this week by a decrease of the Boeing.

In another sign of the turning of the sentiment, the FANG shares – Facebook, Amazon.com Netflix and Google older Alphabet – each logged year-to-date earnings on Monday that were better than the S&P 500, a first in 2019.

Investors dumped technology and FANG shares at the end of last year as a result of the floor of the fear that the Federal Reserve would raise interest rates and worries that the China-US trade conflict would escalate further and pain of the profits of the companies.

But the Federal Reserve in January signaled that rate hikes were essentially off the table for the moment, the removal of Wall Street’s biggest source of fear.

Facebook remains 22 percent below the July 2018 record high as it faces the ongoing review of the treatment of the personal data of the users, but the social network’s shares have risen 30 percent since December, as a result of a recovery of investor confidence.

Netflix has gained 34 percent in 2019, even after the December sales disappointed investors, and if it is facing increasing competition from rivals, including Walt Disney Co., and potentially Apple.

Many investors are also becoming more confident that Washington and Beijing will resolve their trade dispute, opening the way for technology companies’ earnings to grow this year, instead of decreasing as currently projected by sell-side analysts.

“We are in a waiting game,” said Art Hogan, chief market strategist at National Securities. “Neither party wants this to continue much longer. The Chinese economy is slipping and the president wants a victory. Both sides are motivated to resolve this.”

EYE ON THE M&A

After sweeping the AMERICAN corporate tax cuts helped fuel a 24% rise in the S&P 500 technology sector companies earnings per share last year, tech companies’ profits are now expected, on average shrink by about 1 percent in 2019, according to Refinitiv the IBES data.

Analysts based on the fact that the expected decline on recent guidance from companies in the wallet of the working class and that the view can change quickly if the conflict is resolved, Hogan said.

Chipmaker Nvidia’s $6.8 billion acquisition of Mellanox Technologies, announced on Monday, has increased speculation about more technology M&A.

With Microsoft closing the gap on Amazon.com’s leadership in cloud computing, and Alphabet be far behind, the fast-growing cloud-computing industry is an obvious place to watch for more offers, Kulina said.

The highlight of the cloud industry’s hyper growth, database vendor MongoDB strong quarterly report sent its shares up 25.6 percent on Thursday to a record high, with other cloud players also increase, including ServiceNow, Twilio, and Appian.

The ISE Cloud Computing index, an increase of 18 percent so far in 2019.

The Philadelphia Semiconductor index has gained 17 per cent, even if non-final drag associated with a decrease of the demand, with many investors betting on a final resolution of the trade dispute and on a peak in the company in connection with the upcoming introduction of 5G wireless communication technology.

Reporting by Noel Randewich; Editing by Alden Bentley and Leslie Adler

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