Behind the monster rally that drove the Nasdaq to 20,000

Investors are bringing out the champagne glasses after the Nasdaq (COMP.IND) closed above 20,000 points for the first time ever. Helping notch the new heights were the latest CPI numbers, which cemented expectations for another quarter-point rate cut by the Federal Reserve next week. The new milestone brings the return of the tech-concentrated Nasdaq (COMP.IND) to over 30% YTD and shows the staying power of the index’s bull market rally that commenced in May 2023.

Return of Big Tech: The biggest catalysts for the move higher have been fresh record highs at companies like Alphabet (GOOGL), Amazon (AMZN) and Meta (META). A dose of generative AI headlines has given an extra boost to the Mag7 names, such as Google’s launch of Gemini 2 and a “mind-boggling” quantum computing chip, as well as Apple’s (AAPL) long-awaited integration of Siri with ChatGPT and the reported development of in-house AI server chips with Broadcom (AVGO). Tesla (TSLA) also climbed to a fresh record after GM dropped out of the robotaxi race, continuing a monster 70% advance since President-elect Donald Trump’s victory only a month ago.

“A solid rate of economic growth to finish the year is fueling the best rate of annualized earnings growth at 11.9% since the fourth quarter of 2021. That is not a reason for stocks to move higher in the first quarter. It is the reason stocks are moving higher now!” wrote SA Investing Group Leader Lawrence Fuller. “The good news on the earnings front is that estimates are coming down for the current quarter, as they typically do, but by a smaller margin than average. This means we should receive a lot of good news during the earnings season in January, but guidance will be equally important.”

Nas…what? When analysts, journalists and reporters refer to the Nasdaq, they mean the Nasdaq Composite (COMP.IND), and not the Nasdaq 100 (NDX). The difference between the two is that the Nasdaq Composite (COMP.IND) measures the change in more than 2,500 stocks listed on Nasdaq Stock Exchange (NDAQ), while the Nasdaq 100 (NDX) is a market cap-weighted index made up of the 100 largest non-financial companies traded on the exchange. However, both track domestic and international firms, compared to popular indices like the Dow Jones Industrial Average (DJI), which only measures the largest American companies.