A SELLOFF in technology-related stocks eased on Wednesday, causing shares on Wall Street to end higher, coupled by a rotation into cyclical shares that continued.
This was after Federal Reserve chair Jerome Powell told lawmakers that it may take more than three years to reach the central bank’s inflation goals, which is a sign that the Fed plans to leave interest rates unchanged for a while.
Meanwhile, the Nasdaq index, which traded as much as 1.3% lower earlier in the session, regained its footing by early afternoon and closed up. The Dow hit a record high earlier in the session.
GameStop Corp stock, which was at the center of volatile moves in late January by shares talked about on a Reddit forum, more than doubled with no obvious catalyst. Volume was more than two times the 10-day moving average.
“What’s driving the stock market is the fiscal stimulus, the dovish Fed, the real strong, strong earnings that we’re seeing, as well as the fact that we’re going to have a third vaccine,” said Treasury Partners chief investment officer Richard Saperstein.
The US Food and Drug Administration said on Wednesday Johnson & Johnson’s (whose stocks rose 1.3% following the news) one-dose COVID-19 vaccine appeared safe and effective in trials, paving the way for its approval for emergency use as soon as this week.
The Dow Jones Industrial Average closed up 424.51 points, or 1.35%, to 31,961.86, the S&P 500 gained 44.06 points, or 1.14%, to 3,925.43 and the Nasdaq Composite added 132.77 points, or 0.99%, to 13,597.97.
All three main indexes were on track to post strong monthly gains, with the Dow and the S&P 500 set for their best month since November.
Investors have focused on rising US yields and their potential impact on growth stocks. Saperstein said higher yields could pressure stocks but would not derail the upward trend.
“I don’t believe that the 10-year yield going from 1% to 1.5% is going to alter the calculus of owning large technology stocks,” said Saperstein.
Value-oriented stocks have enjoyed a bit of a bounce recently, and the S&P 500 Value index rose for a fourth straight day.
The S&P 500 financial sector hit an all-time peak, while other cyclical stocks including industrials, energy and materials also rose.
Microsoft Corp, Amazon.com Inc and Apple Inc were down 0.4% to 1.1%, while Facebook, Netflix Inc and Alphabet Inc reversed earlier declines.
Growth-oriented stocks are particularly sensitive to rising yields as their value rests heavily on future earnings, which are discounted more deeply when bond returns go up.
Tesla Inc gained 6.2% after star investor Cathie Wood’s Ark Invest fund bought a further US$171 mil worth of the company’s shares in the wake of a sharp fall in the electric-car maker’s stock.
Lowe’s Cos Inc slid 3.7% as it stuck by its 2021 outlook of a US$4 bil to US$8 bil drop in revenue, even after reporting blow-out fourth quarter results.
Advancing issues outnumbered declining ones on the NYSE by a 2.10-to-1 ratio; on Nasdaq, a 2.62-to-1 ratio favoured advancers.
The S&P 500 posted 102 new 52-week highs and no new lows; the Nasdaq Composite recorded 282 new highs and seven new lows.
Volume on US exchanges was 13.68 billion shares, compared with the 16.01 billion average for the full session over the last 20 trading days. – Feb 25, 2021