Against the odds, the Nasdaq Composite (^IXIC -0.16%) is on the rise. For the most part, the growing military conflict in Ukraine has proven problematic for the S&P 500 (^GSPC -0.29%) and the Dow Jones Industrial Average (^DJI 0.05%). Thanks to Nasdaq's respectable resilience on Monday, though, the tech-heavy composite now stands nearly 9% above last week's multi-month low.
The rebound is hardly uniform, though. A couple of Nasdaq-listed stocks are clearly leading the charge, setting a bullish tone and catching the eyes of investors on the hunt for hot trades. Will these two tickers keep on trucking? Here's a closer look.
Check out Check Point
It's not the biggest cybersecurity winner since the market reversed its bearish course on Thursday of last week -- that honor belongs to Palo Alto Networks (PANW 0.81%), with its 26% romp. Check Point Software Technologies (CHKP -0.13%) is the more noteworthy name within the cybersecurity industry right now, however, in that it managed to defy January's marketwide weakness. Check Point was already within sight of record highs before Russian tanks began rolling toward Kyiv. Up nearly 14% since last Wednesday, Check Point's stock is now 36% above its November low.
Image source: Getty Images.
Thank Russia's President Vladimir Putin, mostly. As part of the political posturing linked to the invasion of Ukraine, he has vowed to retaliate against any nation or organization that assists the Ukrainian resistance effort. While he hasn't specifically suggested that cyberattacks and disruptive hacking could be launched against the West, Russia did execute a significant cyberattack on Ukraine before any troops began moving into the country. Putin is clearly willing to use the tactic, and it would certainly be one of the simplest retaliatory actions for Russia to take against the rest of the world.
Assuming that the specter of a major cyberattack is credible, organizations of all ilks are now beefing up their digital defenses. This is investable news for the likes of Check Point Software Technologies and Palo Alto Networks, whose financial fortunes can gain from the terrible threat of large-scale computer attacks.
Steel Dynamics was already rolling
The other big Nasdaq winner of late is a bit surprising, although no less impressive. That's Steel Dynamics (STLD -1.56%). Shares of the steel producer were already catching the inflation-driven tailwind that has buoyed most commodities for the past few months. Something lit a major fire under Steel Dynamics' stock since last Thursday's low, though. Up more than 20% just since then, shares are now trading more than 40% above January's low.
Once again, it's not a stretch to suggest that Russia's invasion of Ukraine is the catalyst. At the very least, the conflict could crimp supply lines going through the steel industry and might disrupt the global supply of the industrial metal itself. In this vein, steel prices are up on the order of 7% since last Wednesday, bouncing back from a steep plunge that day. It makes sense that the industry's stocks are up firmly as well.
However, don't lose sight of the fact that steel prices and Steel Dynamics shares didn't need too much of a catalyst to ignite their current rallies. Spurred by economic recovery, the World Steel Organization believes -- or did anyway, before last week's events -- global steel demand was on pace to grow 2.2% in 2022 following last year's 4.5% uptick in consumption. Standard & Poor's, however, still sees a supply shortfall for this year. Coupled with inflation that doesn't seem to be going away anytime soon, Steel Dynamics is positioned to enjoy serious pricing power for the foreseeable future.
Stay cool
The $64,000 question is, now what? Is there a good enough chance these advances continue on, rewarding investors that jump aboard now? Or do these oversized gains merely set the stage for significant near-term profit-taking that undermines this bullishness?
The answer is, it depends on the timeframe you've got in mind.
Both industries are tricky to navigate. Cybersecurity stocks tend to run hot and cold, with interest in cyberdefense often waning shortly after high-profile hacks become faded memories. These stocks ebb and flow accordingly. Metal companies' stocks are also subject to uncomfortable degrees of volatility, in that metal prices are forever being pushed and pulled by factors like inflation, interest rates, trade environments, and regulation. Given this perpetual volatility, jumping into these hot stocks right now just because they're hot is arguably a mistake -- a big one.
If you're a true long-term investor though, you can at least interpret this extreme bullishness for what it is -- a glimpse of the sort of upside that plays out when you leave these positions alone for long enough periods of time. The underlying natures of both big gains actually aren't new, or even unusual. If you want to plug into this dynamic, the only thing you may want to do here is just to wait a few days for each stock to settle a bit.
