The Nasdaq composite is off to its fastest start to a new year since 2019. Three weeks, or 13 trading days, into 2023, the Nasdaq composite is up 6.4%, amid optimism for a soft landing and the Federal Reserve winding down rate hikes.
That compares to a 9.5% tumble in the first 13 trading days of 2022. Back in 2019, the Nasdaq ran up 7.9% to start the year.
The S&P 500 is also having its best start since 2019, up 3.5% so far this year after tumbling almost 6% at the start of 2022. The Dow Jones is up just 0.7%.
What's driving this year's Nasdaq run? Within the Nasdaq 100, Warner Bros Discovery, MercadoLibre, Atlassian, Nvidia and Idexx Laboratories are the biggest percentage gainers.
Nvidia is the only true megacap among that list. However, Google parent Alphabet, Amazon.com and Tesla are all outperforming the Nasdaq in 2023. Apple is roughly in line while the Microsoft is lagging.
Stock Market Performance
| First 13 Trading Days | Nasdaq composite | S&P 500 index |
|---|---|---|
| 2019 | 7.87% | 6.54% |
| 2020 | 4.44% | 2.79% |
| 2021 | 4.99% | 2.58% |
| 2022 | -9.53% | -5.95% |
| 2023 | 6.44% | 3.47% |
Nasdaq Similarities To 2019
In 2023, the Nasdaq started off near its worst levels in more than two years. The major indexes all bottomed in October 2022, but they slumped again in December. The Nasdaq actually set a bear market closing low on Dec. 28, ending the year just 3.7% above the Oct. 13 intraday low.
Back in 2019, the Nasdaq also started was near recent lows. A brief but violent bear market bottomed in late 2018. The Nasdaq hit its low on Christmas Eve, while the Dow Jones and S&P 500 hit intraday lows on Dec. 26, before all the major indexes roared higher that day and into 2019.
In 2018 and 2022, Fed rate hikes and tightening helped trigger the market sell-offs. Markets have bottomed, anticipating an end to rate hikes in the not-to-distant future.
A big difference between then and now is that 2018's Fed tightening was one of choice. Inflation was relatively tame, but policymakers wanted to normalize policy. When the markets sold off aggressively, Fed chief Jerome Powell quickly altered course.
In 2022, inflation hit 40-year highs, forcing one of the fastest rate-hike campaigns in Fed history. Inflation is coming down quickly, but remains elevated. The risks of at least a mild recession are high in 2023. Fed chief Powell and fellow policymakers have made it clear they don't want to see a strong stock and bond market rally, fearing looser financial conditions.
Full-Year Nasdaq Performance
OK, so the market is having a strong start. What does that mean for full-year performance?
In 2019, the Nasdaq composite rose 35.2%. In 2020, the Nasdaq fared even better, skyrocketing 43.6% thanks to the post-Covid crash bull run. The Nasdaq also advanced 21.4% in 2021, before plunging 33.1% last year.
One reason why 2022 was so terrible was because the bear market lined up with the calendar. The Nasdaq's bull market peak was in November 2021, and finished the year close to highs. The S&P 500 actually hit an intraday all-time high on Jan. 4.
The flip side could be true in 2023. With the market, especially the Nasdaq, still close to bear lows at start of the year — as in 2019 — it wouldn't take much of a advance to have a solid annual performance.
But that doesn't mean it will happen. The Nasdaq surged 12.3% in the first 13 sessions of 1987 and kept running strong until late March, finally peaking in late August. Thanks to the October 1987 market crash, the Nasdaq ended the year down 5.25%.
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Big Nasdaq 100 Stock Movers
WBD stock is up a whopping 37.3% this year. MELI stock has surged 29.8%. TEAM has leapt 22.6%. NVDA stock has spiked 22.1%. IDXX stock has run 19.8%.
MELI stock is technically in a buy zone, according to MarketSmith analysis, but is far above moving averages. Nvidia stock has a cup base. WBD stock and Atlassian are still below their 200-day moving averages while IDXX is extended from possible entries.
As for the megacaps aside from Nvidia, Apple stock is up 6.1% in 2023, just behind the Nasdaq. Microsoft stock is up just 0.1%. Both AAPL and MSFT are just below their 50-day moving averages. However, Amazon stock is up 15.8% while Google stock has rallied 11.1%. Both have retaken their 50-day lines. Tesla stock hit a bear market low on Jan. 6, but has rebounded for 8.3% year-to-date gain. It's above its 21-day line but below the 50-day and 200-day averages.
Microsoft and Tesla earnings are due this week, with Apple, Amazon and Google earnings the following week.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
