Technology Select Sector SPDR Fund Today
(as of 11/27/2024 ET)
- 52-week range
- $181.32
▼
$238.14
- Dividend yield
- 0.56%
- Property under management
- $73.00 billion
With only one month left in 2024, Technical field stands out as one of the top performers of the year. The Technology Select Sector SPDR ETF NYSE: XLKwhich tracks the performance of major tech stocks, has gained an impressive 21.3% year-to-date. Despite its strong run, XLK shows signs of potential for more substantial gains as it remains firm within an ascending gap formation, just 1.96% away from its 52-week high. This proximity to a potential breakout raises an important question: Should investors be chasing further gains in the tech? Sector As we approach the end of the year?
The seasonal tailwind of December
Historically, December has been a favorable month for equities. According to Dow Jones Market data, the S&P 500 has gained an average of 1.3% in December since 1928, making it the third-best month of the year for stocks. This seasonal strength could provide the tailwind technology needs to finish 2024 on a high note, especially now that two key uncertainties, the US election and NVIDIA’s The much anticipated earnings report, is behind us.
however, XLK The broader S&P 500 has slightly lagged in recent months. If the tech sector outperforms in December, it will mark its third year of outperformance out of the last four. However, whether XLK breaks out and rallies depends on the performance of its top three holdings: NVIDIA, Apple, and Microsoft, which collectively account for about 41% of the ETF’s weight.
NVIDIA: Torchbearer of the sector
NVIDIA today
(as of 11/27/2024 06:05 PM ET)
- 52-week range
- $45.01
▼
$152.89
- Dividend yield
- 0.03%
- P/E ratio
- 53.26
- Price target
- $164.15
As the largest holding in XLK, NVIDIA NASDAQ: NVDA has a significant impact on the ETF’s performance. The company dominates the AI landscape, and its Recent Q3 earnings were wonderful NVIDIA reported 93.6% year-over-year revenue growth to $35.08 billion, beating analyst expectations, while adjusted EPS of $0.81 beat estimates by $0.12. Demand for its AI-powered Hopper and Blackwell platforms remains impressive, with the company improving gross margins and maintaining strong profitability.
From a technical perspective, NVDA is consolidating near its all-time high, trading just below the $150 resistance level. A decisive breakout above this zone could add momentum to both NVDA and XLK, providing a solid catalyst for year-end gains in the tech sector.
Apple and Microsoft: The Deciders
Apple today
(as of 11/27/2024 06:15 PM ET)
- 52-week range
- $164.07
▼
$237.49
- Dividend yield
- 0.43%
- P/E ratio
- 38.64
- Price target
- $235.25
While apple NASDAQ: AAPL And Microsoft NASDAQ: MSFT have underperformed NVDA and XLK this year, their contribution to the ETF’s direction is significant.
Apple has spent most of the year consolidating and is just 3.77% away from its 52-week high.
This tight range could act as a launchpad for a breakout if broader market sentiment remains favorable. A change in speed here would significantly strengthen the XLK’s performance.
Microsoft today
(as of 11/27/2024 06:05 PM ET)
- 52-week range
- $362.90
▼
$468.35
- Dividend yield
- 0.78%
- P/E ratio
- 34.90
- Price target
- $503.03
Microsoft, on the other hand, has been the weakest of the three. Down 12% from its 52-week high, the stock has struggled with relative weakness throughout the year.
However, a breakout above $430 could signal a trend reversal, providing much-needed support to XLK.
With MSFT’s historical flexibility and dominance in cloud computing, the possibility of a short-term recovery cannot be ruled out.
Balancing risk and reward
The setup for the XLK title in December is promising, but there are risks in chasing gains without clear confirmation. NVIDIA appears well-positioned to lead the charge, but the underperformance of Apple and Microsoft could dampen the sector’s upside potential.
Investors looking to capitalize on XLK’s potential breakout may want to wait for signs of strength from its top three holdings, particularly Apple and Microsoft. While NVIDIA’s move suggests a faster paceThe expanding sector will need the support of these two lagging giants to sustain a rally through the end of the year.
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