Wall Street was afflicted by extreme volatility in 2018, following a fabulous 2017. Market volatility which first appeared in February on investors' concerns about hyper-inflation aggravated in March, as result of the trade conflict between the United States and China.
Although Wall Street had a relatively smooth run in the next six months, the situation worsened significantly in the last three months of the year fueled by a plethora of factors - yield curve inversion, the recent rate hike and the Fed's tighter monetary stance, conflicting news related to trade war between the United States and China and concerns of a global economic slowdown.
Nasdaq Composite Plunges in 2018
The Nasdaq Composite - one of the three major stock indexes of U.S. stock market - erased all its gains made in 2018. Currently, the tech-heavy index is down 10.3% year to date and a bear market. The tech-laden index has now plunged 23.6% from the all-time record high close achieved on Aug. 29. On Dec 24, Nasdaq Composite closed at 6,192.92, marking its lowest closing since Jul 10, 2017.
The Nasdaq Composite's stiff fall in 2018 can be attributed to three reasons. First, lingering trade conflicts with China significantly dented the technology sector. China is a major source of inputs which are needed by most of the large-cap tech stocks for their final products. Moreover, China also provides the largest market for these high-tech products.
Second, introduction of tariffs in the range of 10 -- 25% on Chinese exports of several important intermediary products of the tech sector raised the cost of production for these companies. Third, the Fed has hiked interest rate four times this year which raised the benchmark lending rate by 1% in 2018. Consequently, the cost of funds jumped up much to the disadvantage of the tech sector.
Tech Sector Likely to Rebound
The technology sector is benefiting from continued strong digital transformation environment. The last few years have witnessed a series of breakthroughs in cloud computing, predictive analysis, artificial intelligence (AI), self-driving vehicles, digital personal assistants, and Internet-of-Things (IoT), which set the stage for strong growth.
The United States is all set to witness massive deployment of 5G super-fast wireless network in 2019. This will significantly raise the demand for high-tech handheld gadgets and micro-processors. Moreover, continued enterprise investment in big data and analytics along with the adoption of Software-as-a-Service (SaaS) presents significant growth opportunity several tech companies.
Additionally, fundamentals of the U.S. economy remain robust. The U.S. GDP grew 3.3% on an average in the first nine months of 2018, better than Trump administration's 3% target growth rate. The fourth quarter is likely to maintain the momentum driven by strong labor market with record low unemployment and solid consumer and business confidence.
5 Nasdaq Stocks Stand Tall in 2018 Despite a plummeting Nasdaq Composite, a few companies have survived the turbulence because of their internal strengths and are poised to perform well in 2019. We take a look at five such stocks that have emerged winners amid this volatility. All these stocks carry a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here . The chart below shows price performance of our five picks year to date.
Vericel Corp. VCEL is focused on developing patient-specific expanded cellular therapies for use in the treatment of patients with severe diseases and conditions. It has delivered average positive earnings surprise in all last four quarters with an average of 54.9%. The company has expected earnings growth of 42% for current year. The Zacks Consensus Estimate for the current year has improved by 31% over the last 60 days. Attunity Ltd. ATTU is a leading global provider of data integration and Big Data management software solutions for the Workplace Applications market. It has delivered average positive earnings surprise of 235.6% in three of the last four quarters. The company has expected earnings growth of 550% for current year. The Zacks Consensus Estimate for the current year has improved by 73.1% over the last 60 days. Amedisys Inc. AMED is a leading provider of healthcare services in the United States. It operates through three segments: Home Health, Hospice, and Personal Care. It has delivered average positive earnings surprise of 16.6% in three of the last four quarters. The company has expected earnings growth of 62% for current year. The Zacks Consensus Estimate for the current year has improved by 5% over the last 60 days. ACM Research Inc. ACMR develops, manufactures and sells single-wafer wet cleaning equipment for enhancing the manufacturing process and yield for integrated chips. It has delivered a positive earnings surprise in all last four quarters with an average of 130.9%. The company has expected earnings growth of 152.6% for current year. The Zacks Consensus Estimate for the current year has improved by 92% over the last 60 days. Crocs Inc. CROX designs, develops, manufactures, markets, and distributes casual lifestyle footwear and accessories for men, women, and children worldwide. It has delivered average positive earnings surprise of 126.3% in three of the last four quarters. The company has expected earnings growth of 235% for current year. The Zacks Consensus Estimate for the current year has improved by 80% over the last 60 days. In addition to the stocks discussed above, would you like to know about our 10 top tickers to buy and hold for the entirety of 2019? These 10 are painstakingly handpicked from over 4,000 companies covered by the Zacks Rank. They are our primary picks poised to outperform in the year ahead. Be among the first to see the new Zacks Top 10 Stocks >>
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Click to get this free report Attunity Ltd. (ATTU): Free Stock Analysis Report Amedisys, Inc. (AMED): Free Stock Analysis Report ACM Research, Inc. (ACMR): Free Stock Analysis Report Crocs, Inc. (CROX): Free Stock Analysis Report Vericel Corporation (VCEL): Get Free Report To read this article on Zacks.com click here. Zacks Investment Research