S&P 500 Hits New Record as Tech Stocks Lead Market Rally
April 08 2021 - 4:32PM
Dow Jones News
By Anna Hirtenstein and Julia Carpenter
The S&P 500 ended Thursday by setting another record,
propelled by a rally in big technology stocks.
Stocks have started the second quarter on strong footing, with
the broad stock market index rising 3.1%. The largest tech
companies have surged ahead as the bond market calmed, easing
concerns about the high valuations of growth stocks.
"Rates going up was part of the reason why you had this
broadening of the market and a bit of a rotation towards value
stocks, especially financials and energy," said Ed Keon, chief
investment officer at QMA. "Now rates have eased off their highs,
you're seeing those sectors underperform and technology come back
into the lead."
The S&P 500 climbed 0.4% to finish the day with its 19th
record this year. The tech-laden Nasdaq Composite rose 1%. The Dow
Jones Industrial Average added roughly 0.2% to finish at 33502.
Federal Reserve Chairman Jerome Powell expressed concern
Thursday over long-term "labor market scarring" and assured
continued support for those out of work due to the pandemic and
subsequent recession.
"It's important to remember we're not going back to the same
economy," he said. "This will be a different economy."
Mr. Powell's remarks underscored Fed policy makers' recent
comments that they would continue with easy monetary policies until
the economy has recovered more.
The latest data on jobless claims showed that layoffs rose for a
second week, highlighting the unevenness of the recovery. Worker
filings for initial unemployment benefits rose to 744,000 last
week, from a revised total of 728,000 the prior week. Economists
surveyed by The Wall Street Journal were expecting a decline to
694,000.
"The dynamic remains supportive for stocks," said Adrien
Pichoud, a portfolio manager and chief economist at SYZ Private
Banking. "The Fed and central banks in general are perceived to be
in no rush to raise rates."
In bond markets, the yield on the 10-year U.S. Treasury note
declined to 1.643%, down from 1.653% on Wednesday. It had climbed
as high as 1.749% at the end of last month. Yields rise when bond
prices fall.
The cooling off in bond yields has led to a revival in the
largest technology stocks' rally. Apple, Microsoft, Amazon.com and
Google's parent Alphabet -- which are the biggest companies by
market value in the S&P 500 -- have each climbed more than 4%
this month after stumbling in March.
Jason Pride, chief investment officer of private wealth at
Glenmede, described this rally as "a bit of a giveback" after the
dip last month.
"We went from everybody throwing value stocks out the window to
everyone piling into them," Mr. Pride sad. "And OK, so things
change a lot, but did the market deserve to react that quickly that
fast?"
In Thursday's session, software companies logged big gains, with
ServiceNow and Autodesk adding 2.9% and 2.4%, respectively. Other
stocks that prospered during lockdown, like Etsy and PayPal
Holdings, climbed as well, rising 5.9% and 2.6%, respectively.
"If there ever was going to be a test for tech, it would be this
environment, with rising bond yields and the work-from-home trade
starting to fade, but tech has remained really resilient in the
face of that," said Seema Shah, chief strategist at Principal
Global Investors.
The consumer staples sector, on the other hand, was a weak spot
Thursday, with Constellation Brands dropping nearly 5% and
Walgreens Boots Alliance off 1.3%.
"A lot of them did very well last year as people stayed home and
bought a lot of bleach and other staples," Mr. Keon said. "Now, as
the pandemic eases and the broader economy is clearly showing signs
of great growth, staples tend to be lower beta both to the economy
and to the market, so they have underperformed in that
environment."
Energy stocks also underperformed after a big run-up to start
2021. Diamondback Energy dropped 1.7% and Valero Energy slipped
1.6%.
Overseas, the pan-continental Stoxx Europe 600 ticked up 0.6% to
a record close. In Asia, most major benchmarks climbed. The
Shanghai Composite Index added less than 0.1%, and Hong Kong's Hang
Seng Index rose 1.2%.
Write to Anna Hirtenstein at anna.hirtenstein@wsj.com and Julia
Carpenter at Julia.Carpenter@wsj.com
(END) Dow Jones Newswires
April 08, 2021 16:17 ET (20:17 GMT)
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