The stock market’s volatility has ramped up another level, and the Nasdaq Composite (NASDAQINDEX:^IXIC) remains in the crosshairs of many investors’ scorn. Early on Tuesday, the Nasdaq fell sharply, losing more than 2% right out of the gate. However, by 3 p.m. EDT, the index had recovered to just a 0.1% loss, far outpacing the bigger declines for most other stock market benchmarks.
It’s been a frustrating period for growth stock investors, especially among technology companies that have seen such huge gains in the past year. Yet at least on Tuesday, the Nasdaq actually got a lot of support from those high-growth stocks. Below, we’ll look more closely at what helped the Nasdaq avoid the steep losses that other stock market indexes suffered.
Getting a bounce
On a down day for the market, it would be natural for investors in some of the Nasdaq’s favorite stocks to figure that they’d be seeing red in their portfolios once again. However, that wasn’t necessarily the case. In particular, some of the most popular software-as-a-service (SaaS) companies found their stock prices moving higher on the day:
- Zoom Video Communications (NASDAQ:ZM) was one of the best performers in the Nasdaq-100, rising more than 4%.
- Workplace collaboration software player Atlassian (NASDAQ:TEAM) also posted a gain of 4%, as did cloud-based data platform provider Splunk (NASDAQ:SPLK).
- Several other SaaS companies were on the gainers list, including 3% rises for electronic signature specialist DocuSign (NASDAQ:DOCU) and cybersecurity company Okta (NASDAQ:OKTA). Datadog (NASDAQ:DDOG) settled for a 2% gain.
To be fair, all of these companies were ripe for a rebound. Even after today’s gains, all six of these stocks are still down more than 10% from where they were in mid-February, when the Nasdaq was hitting record levels. Zoom, Splunk, and Datadog remain down around 30% over that time period.
Living with volatility
The challenge that every investor faces is that while the markets are open five days a week, companies only give out useful information on an occasional basis. In-depth financial reports that allow investors to get a close look at what’s happening with a company’s fundamental business only come four times a year, and updates in between quarterly reports tend to be fairly rare. Three months is a long time to go without any new news to consider about a company, but traders don’t hesitate to push stocks up and down in that vacuum — including some violent moves from time to time.
Moreover, you can’t count on the market’s reaction to important news to make sense in the short run. If a stock has done particularly well in the run-up to an earnings release, for instance, it might reverse and lose ground even after a favorable financial report. We’ve seen that happen on numerous occasions with stocks like these, and we’ve also seen some other stocks across the market show the opposite behavior — rising despite questionable business results because the numbers weren’t quite as bad as feared.
In the end, stock market volatility is something every investor has to come to terms with and accept. By focusing on business metrics, however, you can do a lot toward making yourself immune to the emotional impact of the inevitable ups and downs in stock prices along the way.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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