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Tech titans ride ‘irrational’ rally on Wall Street

Are investors getting carried away?

Jack Derwin

Digital Journalist, Your Money

The rally on Wall Street has extended into a third day, as tech and industry stocks bounce after significant falls in late 2018.

As the US and China extend trade negotiations to a third day, positive sentiment abounds that immediate issues may be resolved driving markets higher.

But is the market getting ahead of itself?

CommSec chief economist Craig James told Trading Day that the gains were largely speculative at the moment.

We need to see the detail before we get too carried away,” James said.

“If what we saw in terms of US markets late last year was undue pessimism, we’ve probably got a degree of undue or irrational optimism because we’re not really responding to anything fundamental,” he explained.

That bullish investing however does have some grounding in the fact that a resolution to ongoing trade tensions would benefit all parties, James added.

“That’s where the hope is, that sense will basically rule at the end of the day.”

While all the big name tech stocks, abbreviated as FAANGs, were routed in the latter part of last year, some dropping by more than 20 per cent off their previous highs, they all rallied again on Tuesday.

Facebook rose 3.25 per cent, Apple 1.91 per cent, and Amazon 1.66 per cent, further cementing its place as the world’s most valuable company. 

Meanwhile, Netflix added another 1.56 per cent to its 2019 surge, with its gains now nearing 20 per cent for the year, and Google finished 0.88 per cent in positive territory.

Those all helped pull the Nasdaq 1.08 per cent higher, while the Dow Jones added 256 points (1.09 per cent), and the S&P 500 rose 0.97 per cent to reach a three-week high.

Watch the full interview above.

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